The official said Netanyahu was upset that German Foreign Minister Sigmar Gabriel is meeting with Breaking the Silence, a whistleblower group critical of Israeli military actions in the West Bank.
Earlier in the day Gabriel said it would be "regrettable" if the meeting were canceled.
The Israeli official spoke on condition of anonymity because he was not authorized to speak on the issue with the media.
German Foreign Minister Sigmar Gabriel said today it would be "regrettable" if Israeli Prime Minister Benjamin Netanyahu cancels their planned talks in Jerusalem because of his meeting with groups critical of Israel's actions in the West Bank, but downplayed the spat.
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Gabriel, whose government remains one of Israel's staunchest allies in Europe, told reporters that he was not informed officially of a possible cancellation.
"I can't answer your question because I don't know if it is true that the meeting is not taking place," he said during a news conference with the Palestinian prime minister in the West Bank.
Earlier, the foreign minister told Germany's ZDF television that it was "completely normal" to meet with Breaking the Silence and B'Tselem, another group critical of Israeli policies.
Gabriel, who is also Germany's vice chancellor, said it would be "unthinkable" to cancel meetings with Netanyahu if the Israeli leader traveled to Germany and met government critics there.
"It would be regrettable if there were a cancellation," he told ZDF "But it's not as though it would be a catastrophe for me. I have been in this country so often and have a lot of friends, and it wouldn't change my relationship with Israel." He noted that a meeting with President Reuven Rivlin was also planned.
"I can't imagine that we would not do such things in the future just to get government appointments."
An Israeli official said that Netanyahu's position remained the same. "It's a choice between Breaking the Silence and the prime minister," said the official, speaking on condition of anonymity because he was discussing a diplomatic matter.
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