The Malaysian government effectively banned the Israeli team from competing at the Youth Sailing World Champs in Lankawai by refusing to issue them visas.
Yachting New Zealand, which has an 18 strong team in Malaysia, are now calling on the world sailing organisation to make a stand.
World Sailing have released a video boasting a record 80 countries at the Youth Worlds. There would have been one more if Malaysia hadn't denied the Israelis their visas.
Sail World editor Richard Gladwell says the decision is outdated.
"They've used the tactics that we saw in the apartheid era to keep the All Blacks or the Maori out of rugby teams by basically putting visa restrictions on them."
Malaysia, a long-time supporter of Palestine, has no diplomatic ties with Israel which produced the boys windsurfing champion at last year's youth worlds – a result Gladwell believes may have influenced the host’s government.
"Of course that was going to be hugely embarrassing for the Malaysian government.
"Suddenly they've got an Israeli athlete standing on the podium with a gold medal round his neck playing the national anthem."
Such embarrassment was never going to happen at this year's worlds in Lankawi with Malaysia drawing up a list of conditions for the Israelis to be considered for visas.
It included no flying of the Israeli flag, no national emblem on their sails and no playing of the Israeli national anthem if they won a medal.
"Of course these conditions haven't been put on any other countries," Gladwell said.
"Imagine the uproar if New Zealand had these sorts of conditions and we had to go there as honorary Australians or something like that. It's just a completely unacceptable situation."
Yachting New Zealand's chief executive David Abercrombie said the Kiwi sailing organisation wanted to take action against the discrimination.
"I really believe that World Sailing have to step in here and make a stance because Malaysia or Lankawai haven't adhered to the rules set by World Sailing for holding an event of this nature."
"Now that might get me into trouble but I believe this should have been dealt with a lot earlier.
"They should have realised that changes were going to be put forward."
Political tainting of the young sailors is of particular concern and an inquiry is underway.
The suspension of Malaysia from World Sailing and even exclusion from the Olympics are possible sanctions.