The Foreign Office has said it was a mistake to invite three West Bank settlers to an official birthday reception in honour of the Queen - and has implied that behind the scenes, the British ambassador to Israel has been rapped over the knuckles for inviting the men.
Three members of the Yesha Council of settlers attended the party at Ambassador Tom Phillips' Ramat Gan residence in June.
But the Foreign Office, reaffirming its stance that the settlements are illegal, says it will ensure settlers are not invited to such receptions again.
Eric Moonman, president of the Zionist Federation, said the Foreign Office had shown "no guts" in withdrawing support for the decision to invite the settlers.
The change of heart came after MP Crispin Blunt, joint chairman of the Council for Arab-British Understanding, asked FCO Minister Kim Howells to explain the reasoning behind the invitations.
Responding to a question in parliament from Mr Blunt, Dr Howells admitted that the settlers' attendance at the reception had sent "not very helpful signals" for the peace process.
But Yisrael Medad, one of the three, has written to tell Dr Howells he was offended by his comments. He called the minister's failure to reply to him "cheap".
He said: "It was not a great surprise to get the invitation as I had previously had supper with Mr Phillips in Jaffa. But Mr Blunt pressed Dr Howells, and the next thing I know, I am persona non grata for British diplomats.
"I have talked dozens of times to other diplomats and I do not think my presence at an official event should be considered as recognising the settlements as not being illegal.
"It is childish behaviour. They are giving in to a very left-wing view. It is quite upsetting."
Mr Moonman added: "It's a most unfortunate action by the MP [Mr Blunt]. If the settlers were recommended by the ambassador, then that should be good enough. It is a case of an MP busy-bodying himself."
But a Foreign Office spokesman said the invitations had been a "mistake" and added: "The government's view on settlements is clear: all settlements are illegal under international law. Reports of recent settlement expansion are at odds with Israel's roadmap commitments and threaten negotiations on a two-state solution."