Federal Labor is split over the government's decision to reclassify East Jerusalem as ''disputed'' rather than ''occupied'', with the NSW branch of the ALP and its Left faction lining up against Opposition Leader Bill Shorten and the Victorian Right.

Mr Shorten and his allies are widely seen as too close to the so-called pro-''Israel lobby''. And there is disquiet about Mr Shorten's muted condemnation of the government's shift on its description of East Jerusalem - a move that has provoked diplomatic protests from Arab communities but which the government says is only a change in terminology, not policy.

Seen as too close to the so-called pro-'Israel lobby': Bill Shorten. Credit:Alex Ellinghausen

Labor insiders said Mr Shorten's deputy, foreign affairs spokeswoman Tanya Plibersek, is particularly unhappy about Mr Shorten's muted response to the policy shift.

Spokesmen for Mr Shorten and Ms Plibersek played down any split between the pair on Israel, issuing almost identical statements on Wednesday that restated Labor's belief that the territory was occupied.