The Foreign Ministry has decided to delay the return of its ambassador to El Salvador after a square in honor of former Palestinian Authority leader Yasser Arafat was inaugurated in the country's capital last week.
The memorial, initiated by the radical opposition party, has placed strain on the usually friendly diplomatic ties between the two countries.
After attempts by the Israeli embassy to prevent the inauguration failed, the Foreign Ministry decided to postpone the return of its ambassador, Jonathan Peled, to San Salvador.
Ministry officials said the square represents the commemoration of a man who symbolizes terror.
Why immortalize Arafat's memory?
Embassy officials requested that the El Salvadorian Foreign Ministry prevent the inauguration.
In response they were reassured that the municipality, responsible for the square's naming, has no authority to approve such a decision, but nothing was done about the issue.
Foreign Ministry representative for Central American affairs Yossi Livne told Ynet "We are talking about a man who's legacy regarding the peace process in the region is so negative, that no where else in the world would anyone consider immortalizing his memory. But here they have decided to do so."
"The world is well aware of his part in (creating) the violence that characterized our region," he said. "Commemorating his memory contradicts the friendly relations that exist between the two countries."
However, last year a square named "Palestine" was established at the very same site. A map of Israel with "Palestine" written across it was also placed at the square.
"We hope they will take the necessary steps to fix the situation," Livne said.