Brazil has apparently rebuffed Israel's nomination of a settler as its next ambassador in a move Israel says will damage diplomatic relations between the two countries.

Dani Dayan, a 60-year-old who lives in the West Bank settlement of Ma’ale Shomron, was nominated in August as Israel's new ambassador to Brasilia.

However Brazil has yet to endorse the Argentina-born diplomat's appointment, following lobbying in Brazil against his nomination and protests to President Dilma Rousseff about Dayan.

Ambassadorial appointments must be endorsed by the host nation - a process known as an agrément. However, if no endorsement is forthcoming within two months, it is understood that the choice has not been accepted.

Dayan was a senior member of the Yesha Council, an umbrella organisation of Jewish settlements in the West Bank, and Brazilian activists are worried that approving his selection would be seen as supporting Israel’s settlements, which are illegal under international law.

Last week, as Israel’s previous ambassador Reda Mansour left Brasilia, a Brazilian official told The Times of Israel that the government would not respond to Dayan's appointment and would wait instead for the Israeli government to get the hint.

However, deputy foreign minister Tzipi Hotovely told Israeli media that relations would sour if Dayan was not accepted by Brasilia.

“The state of Israel will leave the level of diplomatic relations with Brazil at the secondary level if the appointment of Dani Dayan is not confirmed,” Hotovely told Israel’s Channel 10.

In a recent interview with Haaretz, Dayan accused the Israeli government of sitting back instead of pressing the Brazilian government to accept his nomination.

"I don’t know if I will be the ambassador in Brazil and personally, it doesn't matter that much,” Dayan said. “It would even make things much easier for me, but I am fighting for the next ambassador who is a settler.”

“The Israeli response to the current instance will determine how the host country for the next ambassador from Judea and Samaria [the West Bank] is appointed, or heaven forbid, creates a reality in which hundreds of thousands of Israelis are disqualified from serving as ambassadors because of their place of residence and that Israel will be reconciled to it."

Relations between Brazil and Israel have witnessed a steady decline over recent years. In 2010, Brazil recognised Palestine as a sovereign state within the 1967 borders, angering Israel.

Also in 2010, the former Brazilian president Luiz Inacio Lula da Silva improved ties with Israel's nemesis Iran, visiting Tehran in May of that year.

During Israel’s offensive on the Gaza strip last summer, in which more than 2,000 Palestinians were killed, Brazil recalled its ambassador from Israel and condemned “the disproportionate use of force by Israel from which large numbers of civilian casualties, including women and children, resulted”.

The Israeli government hit back by calling Brazil a “diplomatic dwarf” and one which created "problems" rather than "contributes to solutions”.