Britain's advertising watchdog has provoked a furious reaction after ruling that Israel cannot use a photograph of Judaism's holiest shrine, the Western Wall, in a travel advert.

The Advertising Standards Authority upheld a complaint against a press ad produced by the Israel Government Tourist Office because it suggested that the Wall, the only relic of the Second Temple, was part of Israel.

Rabbi Barry Marcus, who holds the Israel portfolio in the Chief Rabbi's cabinet, denounced the decision as "ludicrous, shocking and offensive".

Eric Moonman, co-president of the Zionist Federation, called it "appalling and unjustified".

He added: "It is symptomatic of worrying changes taking place here in attitudes towards Israel, which need to be addressed at the highest level."

Some members of the Jewish public have already protested to the ASA: one, Brenda Priedon, a Belmont Synagogue, member said, "I'm not an activist. But I'm so outraged that I had to speak up."

The advertisment mainly displayed a coastal scene of Tel Aviv, with smaller images of other places to visit "in Israel". The photograph of Jerusalem showed the Western Wall plaza, with the Dome of the Rock just visible in the corner.

The ASA agreed with an anonymous complainant that the advert had misleadingly "implied" that east Jerusalem was part of the state of Israel. The image of Jerusalem used in the ad "featured the Western Wall of the Temple Mount and the Dome of the Rock, which were both in east Jerusalem, a part of the Occupied Territories of the West Bank", it stated.

An ASA spokesman later explained that there was "no ban" on the IGTO using a picture of the Wall in future ads, provided they "do not imply that places in the Occupied Territories are part of the state of Israel".

Asked how the IGTO could do so in practice without breaching ASA rules, he responded: "It is not for the ASA to tell the IGTO… what their future ad campaign should contain."

Israel's ambassador, Ron Prosor, said the ASA had "no business attempting to impose their skewed thinking on to our tourist industry. Jerusalem is the eternal, undivided capital of Israel, and there is nobody of right mind who would not consider the Kotel part of this. I never realised the ASA stood for Absence of Sensible Advice."

Jon Benjamin, chief executive of the Board of Deputies, said: "To proscribe even a view of east Jerusalem is as absurd as it is offensive." Jerusalem Mayor Nir Barkat said the ASA's "shameful accusation shows a complete ignorance of history".

While the IGTO is yet to decide whether to appeal against the ruling, two Facebook groups have been launched in protest, one pledged to stop the ASA "creating an Israel boycott".