The movie, Paradise Now, has already caused a firestorm in Israel and in Jewish communities -- not just over its unsettling subject matter but also because it is listed as hailing from Palestine.
Officials from the Academy of Motion Pictures, Arts and Sciences have listed the film as being from Palestine on its nominations list, however have confirmed they are considering a name change to Palestinian Territories to deflect criticism.
"We are thinking about what to call it, but no final decisions have been made yet," the Academy's communications director John Pavlik told AFP.
"There is some talk about referring it to the Palestinian Territories," he said.
However Mr Pavlik denied reports from Israel that the Academy has come under pressure from the Israeli government or Jewish groups to change the movie's designation, however he did concede that the word Palestine and the controversial subject matter has generated a wave of protest from individuals.
"I keep hearing about this official pressure, but we have not got any pressure from any government or any group," he said.
Israel's Consulate General in Los Angeles insists it did not approach the Academy to have the country designation altered.
However a prominent US Jewish group, the American Jewish Committee, said it objects to the Palestine being used as no such country is recognised by the international community.
"It is inaccurate to say that the film originated from Palestine," spokesman Kenneth Bandler told AFP.
"It came from the Palestinian Authority. Hopefully those involved in the Academy will correct this," he added.
The movie tells the story of two childhood friends who volunteer for a double suicide bombing.
The movie is set mainly in the northern West Bank city of Nablus, but also in the coastal city of Tel Aviv, the intended target of their attack.
Directed by Israeli-born Hany Abu-Assad, it chronicles 48 hours in the life of the young men.
It has already won numerous international awards including the European Film Academy's Best Screenplay award and the Golden Globe for best foreign language film.
The Jerusalem Post reported that a petition to withdraw the film from Oscar contention was sent to the Academy.
The petition argues that the film legitimises murder and humanises the would-be suicide bombers.
Palestine does not exist as an independent state.