The Mufti allied himself with the Nazis
Israeli embassies are being instructed to use for public relations purposes an infamous photograph of Adolf Hitler meeting a top Palestinian cleric.
Far-right Foreign Minister Avigdor Lieberman has personally requested that the photo be sent to missions around the world, a senior official said.
The 1941 shot shows the Nazi leader meeting the Grand Mufti of Jerusalem.
The US is pressuring Israel to end a Jewish building project at a hotel once owned by the cleric, Amin al-Husseini.
AFP news agency quoted an Israeli official as saying the move by Mr Lieberman was linked to the row over the Shepherd Hotel.
"It is important that the world know the facts," a spokesperson for Mr Lieberman told the BBC, without giving further detail.
Haj Amin al-Husseini was a Palestinian nationalist leader who led violent campaigns against Jews and the British authorities in what was then British-ruled Palestine in the 1920s and 1930s.
He fled the territory in 1937, but continued his campaign to oppose British plans to set up a Jewish State in Palestine, allying himself with the Nazis during World War II. He died in Lebanon in 1974.
The meeting with Hitler took place in November 1941 in Berlin, during which Husseini asked Hitler unsuccessfully to back Arab independence and publicly oppose the future creation of Israel.
Last week US officials reportedly summoned Israel's ambassador to Washington and requested a stop to the project to build 20 apartments at the Shepherd Hotel site in Sheikh Jarrah neighbourhood.
It was bought in 1985 by American Jewish millionaire Irving Moskowitz.
The site is in East Jerusalem, which Israel has occupied since 1967.
It has annexed the occupied territory and declared all Jerusalem Israel's eternal capital in a move that has not been recognised by the international community.
Palestinians hope to establish their capital in East Jerusalem, as part of a two-state peace deal with the Israelis.
They say Israel uses settlement and demolition orders to try to force them from the area.