But the BBC said: “The Eurovision Song Contest is not a political event and does not endorse any political message or campaign.
“The competition has always supported the values of friendship, inclusion, tolerance and diversity, and we do not believe it would be appropriate to use the BBC’s participation for political reasons.
"Because of this we will be taking part in this year's event. The host country is determined by the rules of the competition, not the BBC."
The annual contest is due to be held in Tel Aviv in May, following Israeli singer Netta's victory in 2018. The winning country usually hosts the following year's competition.
The EBU, which organises the contest, also emphasised the "non-political character of the event" and pointed out that preparations in Tel Aviv were already "well advanced".
The anti-Israel activists' letter was released a week before Eurovision: You Decide, a live BBC show where the public will vote for the act to represent the UK.
"For any artist of conscience, this would be a dubious honour," the letter said.
"They and the BBC should consider that You Decide is not a principle extended to the Palestinians, who cannot 'decide' to remove Israel's military occupation and live free of apartheid."
Many of the signatories to Wednesday's letter have previously made calls for a cultural boycott of Israel, criticising artists such as Nick Cave, Radiohead and Lana Del Rey for organising concerts in the country.
Their campaign follows a call last September by by a coalition of artists from across Europe for Eurovision to be relocated.
That was organised by the Boycott, Divestment and Sanctions (BDS) movement, which urges a complete boycott of Israel over its policies towards the Palestinians.
Israel says BDS opposes its very existence and is motivated by antisemitism.
