Israel and New Zealand will restore ties after a row over Wellington's backing of a UN resolution in December condemning Israeli settlement building, a statement said Tuesday.

Israeli Prime Minister Benjamin Netanyahu and his New Zealand counterpart Bill English decided to end the dispute following a phone conversation, a statement from Netanyahu's office said.

Israel's ambassador to New Zealand will return to Wellington, it said.

The row came after New Zealand was among the countries calling for a vote at the UN Security Council in December on a resolution condemning Israeli settlement building.

The measure passed after the United States refrained from using its veto, enabling the adoption of the first UN resolution since 1979 to condemn Israel over its settlement policy.

After the resolution passed, Israel recalled its ambassadors to Senegal and New Zealand for consultations.

It has no diplomatic relations with Venezuela or Malaysia, the other two countries that called for the vote.

Israel and Senegal announced earlier this month they were normalising relations after the dispute.