The mayor of Iceland's capital Reykjavik on Saturday said he would scrap plans for a boycott of Israeli goods, a proposal which had raised outrage in Israel and elsewhere.
"I will propose to the municipal council that the idea is withdrawn," Mayor Dagur Eggertsson said on Icelandic public television.
"This was ill-prepared. I blame myself for not following it more closely," he added.
Reykjavik's council had on Tuesday approved a motion to halt the city's purchase of Israeli products until the occupation of the Palestinian territories ends.
It was thus en route to becoming the latest European city to join a global boycott and divestment campaign.
Israeli settlements in the occupied West Bank are seen as illegal under international law as well as a threat to the Middle East peace process by eroding the basis for a future Palestinian state.
The Reykjavik council has a left-wing majority. Representatives of Iceland's centre-right ruling parties voted against the resolution.
The Israeli foreign ministry had swiftly lashed out at Tuesday's decision, describing it as "a volcano of hatred".
Two prominent US Jewish groups on Friday also denounced the move.
The Los Angeles-based Simon Wiesenthal Center, a human rights group, issued a travel advisory to warn Jews of Reykjavik's "racist vote" which it said could "create an environment hostile to Israelis and other Jews".
The New York-headquartered World Jewish Congress meanwhile urged Iceland's federal government to act against the boycott, which it said "only strengthens extremists on both sides."
Iceland's centre-right government had also criticised the initial move, with the foreign ministry saying it did not conform with the law or World Trade Organisation rules.
Eggertsson said he would present a new plan to the city council concerning goods made in the Palestinian territories.
Israel is also up in arms against a push by European Union nations to label products from its settlements, a move it considers tantamount to a boycott.