Prime Minister Bill English is being accused of letting trade, not principle, guide foreign policy after seeking to smooth over relations with Israel.
Israel's ambassador to New Zealand is returning after being recalled during a six-month spat over a United Nations resolution on Israeli settlements on occupied territory.
"It shows a lack of moral strength from Bill English to waver on a legitimate, principled stance as soon as a country like Israel throws its weight around," Green Party global affairs spokesperson Dr Kennedy Graham said in a statement.
"These illegal settlements make it harder and harder for there to be peace between the Israelis and Palestinians. Every new settlement takes away productive land from Palestinians and increases resentment."
Mr English phoned and wrote a letter to Israel's Prime Minister Benjamin Netanyahu, saying he regretted the damage done to relations between the countries as a result of New Zealand proposing Resolution 2344 at the United Nations Security Council, Israeli Foreign Ministry spokesperson Michal Maayan said in a statement on Tuesday.
The UN resolution passed in the 15-member Security Council because the United States, under the administration of former President Barack Obama, did not wield its veto power and instead abstained, breaking with its long-standing tradition of diplomatically shielding Israel at the international body.
Continued settlement building on land Israel captured in the 1967 Middle East War and which Palestinians hope will eventually form part of an independent state has drawn criticism from the United Nations and most of the international community. Palestinians cite it as a major obstacle in now-stalled peace talks.
On June 4 Israel said it was returning its ambassador to Senegal, after recalling him over the UN Security Council resolution. Israel does not have diplomatic ties with Malaysia and Venezuela.
Ms Maayan said the Israeli ambassador to New Zealand will return to Wellington in the next few days.