JERUSALEM — After a monthslong diplomatic standoff with Brazil over plans to install a former settler leader as its ambassador there, Israel pulled back on Monday — reassigning him to a post in the United States after the government in Brasília refused to approve his appointment.
The office of Israel’s prime minister, Benjamin Netanyahu, issued a brief statement saying he had decided to appoint the former settler leader, Dani Dayan, as consul general in New York.
“He will replace Foreign Ministry career official Ido Aharoni, who is completing his term,” the statement said. Officials in the prime minister’s office and in the Foreign Ministry declined to comment further.
Mr. Dayan said he had told Mr. Netanyahu, who also serves as foreign minister, that he preferred the position in New York when the Brasília job was first discussed. “I believe in my ability to bring about a revolution in Israeli public relations in North America,” he wrote in a text message, “and New York is its beating heart.”
Speaking earlier on Army Radio in Israel, Mr. Dayan, an immigrant from Argentina who made a fortune running an information technology company, said his reassignment should not be seen as giving in to Brazil. “I think we did not have a choice,” he said. “Those that did not want us in Brasília got us in New York, the capital of the world.”
In Brazil, Israel’s about-face was seen as a victory for the embattled president, Dilma Rousseff, giving her government — which is beleaguered by corruption scandals, an economic crisis and a growing movement to impeach her — a rare bit of good news. “Dilma’s personal dignity was at stake,” said Guilherme Casarões, a specialist in Brazilian-Israeli relations at the university ESPM in São Paulo.
The dispute began in August when Mr. Netanyahu announced the appointment to Brazil of Mr. Dayan, the former chairman of an organization representing Jewish settlers in the West Bank.
The government in Brasilía declined to grant its approval, diplomatic code for indicating displeasure. Brazilian officials said the government’s silence reflected its objection to the way Israel had handled the matter by announcing Mr. Dayan’s appointment before checking whether he would be accepted.
Brazil formally recognized Palestinian statehood within the 1967 boundaries of the West Bank, Gaza and East Jerusalem five years ago, and most of the world considers the settlements a violation of international law.
As the impasse dragged on, Israel dug in. The deputy foreign minister, Tzipi Hotovely, said in December — soon after the previous ambassador to Brazil, Reda Mansour, had returned to Israel — that Mr. Netanyahu’s government would downgrade its relations and be represented by a second-tier diplomat if Mr. Dayan was not accepted.
The standoff became increasingly embarrassing for Israel, and the reassignment of Mr. Dayan to New York provided a way out.
In an interview published on Friday in the Israeli newspaper Haaretz, Mr. Dayan gave no inkling that he knew a shift was imminent. “The position in principle is that there will not be another ambassador,” he said.
Mr. Dayan added that he would remove his candidacy immediately if asked to do so officially, but that “surrendering” to a Brazilian boycott because of his settler connections would be worse than having no Israeli ambassador in Brazil.
In what may have been a premature indication that Israel was about to step back from the dispute, the Israeli Foreign Ministry issued a new tender for the position of Israel’s ambassador to Brasília on March 17. The ministry quickly issued a statement saying that the announcement was “an unfortunate bureaucratic mistake” and that Mr. Dayan was still Israel’s choice.
How much Ms. Rousseff can capitalize on the dispute’s outcome is unclear. Discussion of foreign policy remains limited chiefly to Brazil’s elite. And few ever thought this issue would help her much in domestic politics.
Both the presidential palace and Brazil’s Foreign Ministry declined to comment on Monday.
The broader episode illustrates how the Israeli government badly miscalculated as far as Brazil’s views on the Israeli-Palestinian conflict, many say.
In fact, the nomination was a rare moment in the last several months in which Brazilian politicians were united.
Opposition politicians, many of whom have been heavily involved in an effort to impeach Ms. Rousseff, largely remained silent on the matter.
Two of the country’s most influential newspapers, O Estado de São Paulo and Folha de S. Paulo, published scathing editorials castigating Mr. Netanyahu and supporting Ms. Rousseff’s handling of the nomination.
Because of an editing error, an earlier version of this article misspelled, in one reference, the surname of Brazil’s president. She is Dilma Rousseff, not Rouseff.