The Israeli Minister of Tourism, Stas Misezhnikov, withdrew NIS 300,000 (£54,000) in sponsorship for a tour of Jerusalem by the delegates to the Uefa congress last week after the Israeli FA insisted there be no media coverage of the event.
The Uefa Congress brought 300 delegates from the football world to Israel, including Uefa President Michel Platini, FA Chairman Lord Triesman and the heads of all 53 European FAs. Also present were Fifa President Sepp Blatter and former German captain and manager Franz Beckenbauer, a member of Fifa's Executive Committee.
The tour of Jerusalem took place after official proceedings at the Uefa annual conference wound up in Tel Aviv, and included the holy sites in the Old City.
Mr Platini dismissed suggestions that Uefa had pressured the IFA to cancel coverage of the Jerusalem tour to avoid being seen as endorsing Israeli sovereignty over the city. "I don't think it is for me to comment. The cancellation is an internal Israeli matter."
Justifying his decision to withdraw funding, Mr Misezhnikov, who is a member of Avigdor Lieberman's Israel Beiteinu party, said: "Given that the Tourism Ministry has been prevented from media coverage for the purposes of marketing Israel overseas, the ministry has chosen not to be part of the event at the taxpayers' expense."
IFA Spokesman Gil Lebanony said the cancellation was for logistical reasons.
"There was no pressure from Uefa. We brought 370 delegates and their families to Jerusalem and over 50 photographers applied to cover the event. It would have been unfair to allow so many journalists on a private visit through the alleyways of the Old City, so we allowed just the official IFA and Uefa journalists."
Mr Lebanony added that Mr Platini and Mr Beckenbauer, the soccer legends who would have been of major interest to the media, were unable to make the visit to the Old City due to other engagements. He insisted there had been no agreement with the Tourism Ministry about media coverage.
Earlier in the day President Shimon Peres received a standing ovation at the Uefa Congress.