Australia's Islamic leaders have accused the federal government of trying to align more closely with Israel by refusing to acknowledge East Jerusalem as occupied territory.
The Australian National Imams Council has expressed its deep opposition to what it's calling an "irresponsible" shift from the government's long-standing bipartisan policy on the Middle East.
The government sparked a backlash after ruling out using the term "occupied" for the ancient city, deeming the term pejorative and unhelpful to the Middle East peace process.
Foreign Minister Julie Bishop on Thursday will meet with furious ambassadors from Islamic nations in Canberra to insist the government's policy hasn't changed.
But the imams council says the comments are "irresponsible, impertinent and biased towards Israel".
"We are concerned the comments are part of a shift by the Abbott government to give greater support to Israel," Sheikh Mohamadu Saleem said in a statement on Wednesday.
"[The comments] may therefore harm Australia's international reputation and export trade relations with more than 50 countries particularly within the Middle East and the Asian region."
Islamic nations have warned that the Arab League and Organisation of Islamic Co-operation could consider slapping a trade ban on Australian agricultural products into the Middle East in retaliation.
It's understood the Deputy Secretary-General of the Arab League has also lodged his official protest with Australia's ambassador in Cairo.
Ms Bishop said the government was committed to a two-state solution where Israelis and Palestinians could live peacefully behind internationally-recognised borders.
"That has always been our policy, and will remain our policy," she told the National Press Club on Wednesday.
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