The plot to assassinate ambassador Einat Kranz-Neiger began at the end of 2024, Axios cited a source with knowledge of the matter as saying, and was led by a member of the IRGC Quds Force's secretive Unit 11000.
The operative, according to the source, spent several years overseeing agents from Iran's embassy in Venezuela.
"The plot was contained and does not pose a current threat," the outlet quoted a US official as saying.
"This is just the latest in a long history of assassination attempts by Iran around the world targeting diplomats, journalists, dissidents, and anyone who disagrees with them — something that should deeply concern every country where there is an Iranian presence," the US official added, according to Axios.
Israel and Iran have been arch-enemies since the 1979 Islamic Revolution made enmity to the Jewish State a key element of state ideology.
Their confrontation had mostly been contained to indirect fighting between Israel and Iran-backed Islamist armed groups in the Middle East including Hezbollah in Lebanon and Hamas in the occupied Palestinian territories.
The October 7, 2023 attacks on Israel led by Hamas helped propel the conflict into a direct showdown which culminated in a 12-day war in June.
Israel launched an air strike on Iran's embassy in Damascus in April 2024 killing several senior IRGC personnel and was widely believed to have carried out the assassination of Hamas senior official Ismail Haniyeh in Tehran in July last year.
A US federal court last week handed out lengthy sentences to two men convicted of seeking to kill US-based Iranian dissident Masih Alinejad in a plot prosecutors said was orchestrated by the IRGC.
Israel, Axios added, thanked Mexico for foiling the plot.
"The Israeli intelligence and security community will continue to work tirelessly, in full cooperation with security and intelligence agencies around the world, to thwart terror threats from Iran and its proxies against Israeli and Jewish targets worldwide," Axios quoted Israeli Foreign Ministry spokesperson Oren Marmorstein as saying.