The Tricycle Theatre and the UK Jewish Film Festival have settled their differences after an agreement was struck to end the theatre’s boycott.

The venue in Kilburn, north-west London, has shown UKJFF films for the past eight years, but announced last week that it would not host six galas and 26 screenings this year because of what it called the festival’s “inappropriate” ties to the Israeli embassy.

The Tricycle had demanded that the UKJFF return £1,400 sponsorship it receives from the embassy, saying that the theatre would compensate, but the UKJFF refused.

That led to widespread criticism of the venue, but after talks between the parties this week, the theatre backed down.

It has withdrawn its objections to the embassy funding and said it would welcome the festival back.

The 2014 festival will not take place at the theatre, but the Tricycle may hold some UKJFF-related events later this year.

In a joint statement, the UKJFF and Tricycle Theatre said: “Some weeks ago the UKJFF fell out, very publicly, with The Tricycle over a condition imposed by the Tricycle regarding funding. This provoked considerable public upset. Both organisations have come together to end that.

“Following lengthy discussions between The Tricycle and UKJFF, the Tricycle has now withdrawn its objection and invited back the UK Jewish Film Festival on the same terms as in previous years with no restrictions on funding from the Embassy of Israel in London.

“The UKJFF and The Tricycle have agreed to work together to rebuild their relationship and although the festival is not able to return in 2014, we hope to begin the process of rebuilding trust and confidence with a view to holding events in the future.

“We both profoundly hope that those who take differing views on the events of the last few weeks will follow our lead and come together to acknowledge that dialogue, reconciliation and engagement will resolve points of difference and ensure that cultural diversity thrives in all communities.”

The Board of Deputies and Jewish Leadership Council said they welcomed the decision.

In a joint statement the Board and JLC said: "Although the original decision taken by the Tricycle tore through the hearts of the wider Jewish community, we are greatly reassured to see that dialogue has prevailed over divestment.

"We look forward to the rebuilding of trust and confidence between The Tricycle and the UK Jewish Film Festival."