The New Israel Fund will no longer give grants to any group that "works to deny the right of the Jewish people to sovereign self-determination within Israel".
The new guidelines were released late last month following months of deliberations, in an attempt to clarify the group's relationship with grantees that question Israel's definition as a Jewish state.
The new guidelines have left some of NIF's grantees wondering if they will still be eligible for support from the fund. On the one hand, the principle stops short of demanding that groups receiving funds accept the two-state solution and recognise Israel as a Jewish state. But on the other hand it could call into question groups that aspire to change Israel's social and legal structure in a way that would change Israel's definition from a "Jewish state" to a "state of all its citizens".
Daniel Sokatch, CEO of the New Israel Fund, said the new guidelines would not lead to "massive changes" in the group's funding policy, because they are merely a "codification of the existing situation". The NIF also made clear that the new guidelines will not be implemented retroactively and that groups could only be denied grants based on their actions, not on their views and beliefs.
Mr Sokatch admits, however, that at least in part, the need for this codification came about because of the harsh attacks NIF came under from two Israeli groups - Im Tirtzu and NGO Monitor.
"It was important for us to define ourselves and not allow others to define who we are," he said.
Both groups attacked NIF, the largest supporter of progressive and civil society causes in Israel, for the groups it has chosen to fund. Im Tirtzu, which accompanied the attacks with an ad campaign describing NIF as anti-Zionist and depicting its president Naomi Chazan wearing a horn on her forehead, claimed that most of the material used by the Goldstone committee investigating the 2008 Gaza war was provided by groups funded by NIF.
NGO Monitor, the Jerusalem-based watchdog organisation, called the new guidelines "an important step", although the group argued that NIF is still "sending mixed signals" regarding its funding policy.
The New Israel Fund would not discuss future funding for any specific group, and stressed that all decisions will be made once the grants are up for renewal.