Israel said the British consulate in Jerusalem ended its functions on Thursday but that seven diplomats would be allowed to remain in a limited capacity, with the UK saying it would continue to offer "vital services".
The move comes after Israel ordered the closure of the consulate in September as retaliation after London led Western sanctions over violence by Israeli settlers against Palestinians in the occupied West Bank.
Israeli Foreign Minister Gideon Saar said Thursday's move to downsize the UK presence had followed a dialogue with the British government in order to avoid an escalation of tensions between the two countries.
"As I announced, the British consulate in Jerusalem ended its role today," Saar said in a statement, adding that 20 diplomats including the consul general were ending their missions and leaving the country.
Saar said the building is the property of the British government and that a "task force of only seven diplomats" would be allowed to operate from the premises, "which ceased to function as a consulate today".
"Their scope of activity will be very limited," Saar said.
Britain and Israel have "agreed on the continuation of dialogue between the governments, within which both sides will be able to raise issues important to them", he said.
The UK government pledged to continue delivering "vital services" in Jerusalem, saying the consulate general building would remain open and would "be known as the UK Mission, Jerusalem".
"The UK Mission, Jerusalem is independent, operational and will continue to deliver vital services and our work with the Palestinian people," Foreign Minister Ed Miliband said in a statement.
- Israeli settlements -
An AFP photographer on Thursday saw that the diplomatic emblem and a plaque that adorned the consulate's facade had been removed.
It was not immediately clear whether new plaques would be put up.
On September 8, Saar ordered the British consulate to close.
At the time, he said Israel would also expel British representatives at a center monitoring the US-brokered ceasefire plan in Gaza, bar British training for Palestinian Authority forces and ban 12 Britons, mostly members of parliament, from visiting.
Saar on Thursday said the measures had been implemented.
The retaliation came after 12 countries including Britain, Canada and France announced they would sanction trade with Israeli settlements in the West Bank, following a surge in settler attacks against Palestinians in the occupied territory.
The British consulate in Jerusalem was founded nearly 200 years ago.
It lies in east Jerusalem, part of the historically Palestinian area that Israel captured in 1967. Israel later annexed east Jerusalem and considers the holy city its undivided capital.
While Israel controls east Jerusalem, most countries including Britain do not recognize its sovereignty over the whole city.
The British consulate handles "political, commercial, security and economic interests between the UK and Palestine", according to its website as well as providing consular services to British nationals in Jerusalem, the West Bank and Gaza.
