"It is a symbol of the warm friendship enjoyed between the people of India and Israel and the two countries politically. It is a proud moment for us to be honouring a leader whose message remains relevant till today," the Mayor of Kiryat Gat, Aviram Dahari, said.
Calling upon local students gathered at the ceremony to learn from the great Indian leader, Dahari said it is also an "educational initiative for local children to learn about other cultures and their greats".
Kiryat Gat is a small township in the south of Israel with about 2,000 Indians from the Bene Israel community living here.
The plaque placed at the roundabout has been an initiative of a local Indian resident, Roger Judah, whose contribution was applauded by all the participants.
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"It is the first of its kind and certainly a proud moment for all of us", Judah said.
Israel has a street named after Indian great Rabindranath Tagore in Tel Aviv but it is the first time that something in the country has been named after father of the nation.
India's Ambassador to Israel, Jaideep Sarkar, called it a "memorable" day.
"Mahatma Gandhi has a special place in the hearts of Indians but it is a matter of great honour and pride to see him being honoured this way here," Sarkar said.
Drawing parallels between Israel's first Prime Minister David Ben-Gurion and Mahatma Gandhi, the Indian envoy pointed out that when he visited the hut of the Israeli leader in Sde Boker he was surprised to see Gandhi's photo as the only one hanging on the wall.
Hundreds of Indians from all over Israel gathered to participate in the ceremony.