US aircraft were set to take part in the exercise
Turkey has postponed a joint air force drill after opposing Israel's participation, the Israeli army says.
The regular exercise to improve international aerial cooperation was to involve several Nato air forces.
But Israel's exclusion led to the United States and Italy refusing to take part in the exercise either.
Relations between Israel and Turkey have cooled since Ankara criticised Israel's offensive in the Hamas-ruled Gaza Strip in December and January.
Turkey and Israel have previously enjoyed close military cooperation and conduct joint naval exercises.
The two countries share intelligence and have strong trade ties, following a military cooperation agreement in 1996.
Turkey is one of the few Muslim countries to have relations with Israel, but these have been under strain since the Islamist-rooted AK Party was elected to power in 2002.
In January, Turkish Prime Minister Tayyip Erdogan publicly criticised Israel over the Gaza campaign and walked out of a session of the World Economic Forum in Switzerland attended by Israeli President Shimon Peres .