According to U.S. officials, cremations take place at Saydnaya military prison some 30 kilometres from Damascus, as the Syrian authorities hide acts of mass murders.
The Syrian government denied the United States' accusation on Tuesday, calling it a "new Hollywood story detached from reality".
"Successive US administrations have repeatedly fabricated lies and allegations to justify their aggressive and interventionist policies in other sovereign countries", the ministry said.
The United States accused Syria on Monday of executing thousands of imprisoned political opponents and burning their bodies in a crematorium to hide the evidence, testing the USA administration's willingness to respond to atrocities, other than chemical weapons attacks, that it blames on Syria's regime headed by authoritarian Bashar Assad's.
On Monday, the U.S. State Department said that as many as 50 prisoners are being hanged every day at the Saydnaya prison.
A day earlier, Stuart Jones, the acting US assistant secretary for Near Eastern Affairs, said the crematorium could be used to dispose of bodies from Saydnaya.
Construction and Housing Minister Yoav Galant (Kulanu) said on Tuesday that the time had come to assassinate Syrian President Bashar Assad.
Beginning in 2013, the regime is believed to have "modified a building" in the prison complex to support what appears to be a crematorium, Jones said.
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The Amnesty International report says that during a four-year period, from March 2011 to December 2015, the Syrian government "quietly slaughtered between 5,000 and 13,000 prisoners at Saydnaya, dumping their bodies in mass graves".
The government of President Bashar Assad has always been accused of killing thousands of prisoners and burying them in mass graves.
Along with the crematorium accusations, the source referred to the allegations of the government's use of "barrel bombs" and "chemical weapons" as calculated fabrications.
The latest accusations have cast a shadow over Syria peace talks in Geneva, where Syrian government and opposition representatives sat down separately with the United Nations envoy as talks got underway on Tuesday. The Syrian leader has however given more credit to a separate diplomatic track in Kazakhstan's capital Astana, which is being led by his allies Russian Federation and Iran along with Turkey.
The Observatory said two women were killed by rocket fire in a Damascus suburb and another was killed by aerial bombardment in Homs province.
Local activists reported higher death tolls.
Associated Press Writer Jamey Keaten in Geneva contributed to this report.
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