The East London council of Tower Hamlets has voted to "do everything in its power" to support a boycott of "the pariah state" of Israel.
Councillors also called for a review of the borough's £15 million contract with multinational Veolia for waste collection because of the company's work in Israel.
But a council spokesman said that any decision to cut ties with Veolia would rest with Mayor Lutfur Rahman or his cabinet.
The original motion, proposed by Respect councillors Harun Miah and Fozol Miah, had urged the council to "terminate" all contracts with Veolia.
But this was changed to "review" its position with the firm - and place no further contracts with it - after an amendment moved by Deputy Mayor Ohid Ahmed.
The resolution, passed by 11 votes to seven, claimed that Veolia's work for the Israeli government assisted the "continued oppression of the Palestinian people".
A spokesman for Veolia - whose 11-year contract with Tower Hamlets has another six years to run - said: "We are in regular contact with the council regarding our contract so that we can address any issues that may arise."
At Tower Hamlets, a spokesman explained that "motions passed at full council represent the council's elected members expressing their opinions. However, in the event that a motion concerns a matter that is the responsibility of the Mayor, the council motion can only be advisory. Any formal decision relating to that matter would need to be made by the Mayor or the cabinet."
Mr Rahman was controversially elected as Mayor last year as an independent after being deselected by Labour. He has denied being a member of the radical Islamic Forum of Europe, which has been influential in local politics.
Conservative finance spokesman David Snowdon, who voted against the "ill-prepared motion", said it would "cause potentially grave financial problems for this cash-strapped borough. To break a contract because of a handful of councillors' views on foreign policy, a policy not shared by the UK government or opposition, would enable the supplier to sue for massive compensation".
He added: "This motion presents Lutfur Rahman with a real test. It was proposed by his backers in Respect and carried with the votes of his supporters."