Sweden has withdrawn its aircraft from an international air exercise after finding out Israel was taking part.
Six Swedish Gripen fighters had been due to take part in the exercise
Sweden had been due to send six fighter jets to the Volcanex 2006 exercise in Italy as part of preparations for international peacekeeping operations.
The government strongly denies Israeli media speculation that there was a political reason for pulling out or that it is boycotting Israel.
The foreign ministry says it is down to appropriate use of limited resources.
The Israeli press ran headlines of a "Swedish boycott" and the National Religious Party described the move as "anti-Semitic".
Sweden traditionally sticks to a policy of neutrality, but is involved in UN peacekeeping and Nato's Partnership for Peace programme.
Swedish Defence Minister Leni Bjoerklund said the scenario for the exercise in May, involving 10 European countries, had initially been international peacekeeping missions.
Not mentioning Israel by name, she said the armed forces were told at a late stage "that a state not belonging to the Partnership for Peace, and with which Sweden did not previously have bilateral military co-operation and which does not take part in international peacekeeping missions", was to take part.
She said the government advised the armed forces that "Sweden's participation was no longer regarded as appropriate".
Foreign Minister Jan Eliasson said due to the high cost of taking part and limited resources, Sweden had to focus on exercises that involved its immediate partners.
"We don't see Israel as a country that we will in all probability co-operate with in peacekeeping operations for the time being," he said.
He said it was in no way a boycott and was "purely practical".
Mr Eliasson said his ministry would talk to the Israeli government to reassure them of their position.