Cisco Systems, Inc. (NASDAQ.CSCO), the largest maker of networking equipment, has ended a longstanding sales partnership with ZTE Corp. (0763.HK, 000063.SZ), China’s second-largest telecommunications equipment maker, after an internal investigation into allegations that the Chinese firm sold Cisco-branded networking gear to Iran.

“Cisco has no current relationship with ZTE,” John Earnhardt, spokesman for San Jose, California-based Cisco.

In a recent interview, John Chambers, Cisco's chief executive, declined to discuss the results of the company's investigation of ZTE's sales to Iran, Reuters reported. But he said Cisco doesn't "tolerate any direct or indirect" sales of its equipment to embargoed countries such as Iran. "And when that occurs, we step up and deal with it very firmly. So I think you can assume that you will not see that happen again."

David Dai Shu, a ZTE spokesman, said of Cisco's decision to cut ties: "ZTE is highly concerned with the matter and is communicating with Cisco. At the same time, ZTE is actively cooperating with the U.S. government about the probe to Iran. We believe it will be properly addressed."

The U.S. House Intelligence Committee said in a report Monday that ZTE and fellow Chinese telecom equipment maker Huawei Technologies Co. Ltd should be kept from the U.S. market, as they are under the influence of China's government and pose a security threats. Both companies deny the allegation.

The FBI has opened a criminal investigation targeting the world’s fourth-largest handset vendor in July, which allegedly conspired to illegally ship hardware and software purchased from U.S. tech firms to Iran’s government-controlled telecom company, a violation of several federal laws and a trade embargo imposed on the Islamic nation.

The federal investigations stem from a Reuters report in March that the Shenzhen-based company sold Iran's largest telecom firm a powerful surveillance system capable of monitoring landline, mobile and Internet communications.

The Reuters article also reported that ZTE's 907-page "Packing List" for the $120 million contract, dated July 24, 2011, included hardware and software products from several top U.S. tech companies, including Microsoft Corp, Hewlett-Packard Co, Oracle Corp, Cisco Systems Inc and Dell Inc. Sales of the equipment are prohibited by U.S. sanctions on Iran.

According to a confidential FBI affidavit in May, Ashley Kyle Yablon, the general counsel of ZTE’s U.S. subsidiary in Texas, told two FBI agents that ZTE officials had discussed shredding documents, altering the packing list, and denying it was genuine in an effort to subvert a Department of Commerce investigation into ZTE's sales of U.S. equipment to Iran, the Smoking Gun website said.