The pro-Palestinian group says Israeli soldiers started throwing sound grenades and firing rubber bullets during the demonstration, injuring seven people, including Phil Reiss from Sydney and a Danish demonstrator.
ISM spokeswoman Zadie Susser Mr Reiss, who had been volunteering with the organisation for two weeks, was seriously injured after being shot in the head at close rang with the rubber bullets.
"He was standing with a video camera filming and they shot him," she told AAP. "Phil walked a little bit then sat down, and me and an Israeli activist helped him get up and the blood was spurting out of his head.”
"We got him out of the line of fire and ... as we were getting him into the ambulance an Israeli soldier grabbed his long hair and they all tried to stop him from leaving in the ambulance even though they knew he was injured," Mr Susser added.
Moderate condition
Ms Susser said Mr Reiss had hemorrhaging in his brain and was being treated in Tel Hashomer, a hospital in Tel Aviv, "We spoke to the doctor a few hours ago and he told us Phil was in a moderate condition," she said.
She said ISM is a non-violent, Palestinian-led movement committed to resisting the Israeli occupation of Palestinian land.
The violence occurred during a weekly demonstration protesting against the building of Israel's barrier at the West Bank town of Bilin.
The Australian Department of Foreign Affairs and Trade confirmed a 29 year old man had been injured, but could not confirm his name at this stage.