Israel has reassigned its nominee for ambassador to Brazil, whose appointment Brasilia refused to accept, apparently because he is a former settler leader.
Dani Dayan will now become Israel’s consul general in New York, ending a seven-month diplomatic stand-off.
Israel had previously said it would not replace Mr Dayan as its nominee.
Mr Dayan’s appointment caused outrage among left-wing groups in Brazil, which lobbied President Dilma Rousseff to reject it.
The Argentina-born official was chairman of the Yesha Council, an umbrella group representing Jewish settlers in the occupied territories, from 2007 to 2013.
The fate of Jewish settlements in the West Bank and East Jerusalem – land claimed by Palestinians for a future state – is one of the most contentious issues between Israel and the Palestinians.
The settlements are considered illegal under international law, though Israel disputes this.
In a statement on Monday, the Israeli prime minister’s office announced Mr Dayan’s new appointment, without any reference to Brazil.
Mr Dayan said his deployment to New York was “a victory over the BDS” – the pro-Palestinian Boycott, Divestment and Sanctions movement which targets Israel politically, economically and culturally.
“I think those elements who did not want a settler leader in Brasilia, got a settler leader in the world’s capital,” he told an anti-BDS conference in Jerusalem.
Brazil is Israel’s largest trading partner in South America, but relations have been tense since 2010, when Brazil said it recognised Palestinian statehood in the West Bank, Gaza and East Jerusalem.
They soured further in 2014 when Brazil recalled its ambassador from Israel in protest at what it called the “disproportionate use of force” by Israel in its summer offensive in Gaza.
In response, an Israeli foreign ministry spokesman called Brazil a “diplomatic dwarf”.