Prime Minister Scott Morrison has encountered more objections to his policy shift on Israel, as a prominent Asian leader raises concerns about the decision and warns that questions over Palestine are contributing to terrorism.

Malaysian Prime Minister Mahathir Mohamad raised the issue during a meeting with Mr Morrison in Singapore on Thursday on the sidelines of the East Asia Summit of regional leaders.

"I pointed out that in dealing with terrorism, one has to know the causes," Dr Mahathir told reporters after the meeting.

"Adding to the cause for terrorism is not going to be helpful, I pointed that out."