Turkey has expelled the Israeli ambassador and suspended military accords with its former ally following the publication of a UN report on the attack on a Gaza aid flotilla last year.
A spokesperson for Israeli Prime Minister Benjamin Netanyahu said his government would hold consultations before deciding how to react.
The UN report found that Israel used "excessive and unreasonable" force when its soldiers stormed the Mavi Mamara activist ship - leaving nine Turkish citizens dead.
The vessel was the largest in a flotilla of six ships that were seeking to breach the naval blockade of Gaza and delivering aid to Palestinians in Gaza. There were no significant injuries reported during the boarding of the other ships in the flotilla.
Israel calls its Gaza blockade a precaution against arms reaching Hamas and other Palestinian guerrillas by sea. Palestinians and their supporters say the blockade is illegal collective punishment - a view some UN officials have echoed.
The report said it considered Israel's naval blockade of Gaza to be legal.
However, in comments that considerably weakened the force of the new report, both Israeli and Turkish members of the four-man UN panel said they disagreed with key findings.
The Turkish panellist dissociated himself from some of the conclusions.
The report said Israeli commandos faced "organised and violent resistance from a group of passengers" in the incident last year.
But in criticism of Israel, it said the amount of force used by the Israelis on board the Mavi Marmara was "excessive and unreasonable".
Ankara has demanded that Israel apologise for the raid, but the Israeli government has made it clear that it will not issue a formal apology.
The report said Israel's blockade of Hamas-run Gaza "was imposed as a legitimate security measure in order to prevent weapons from entering Gaza by sea and its implementation complied with the requirements of international law".
The flotilla "acted recklessly" in trying to breach the blockade and there were "serious questions about the conduct, true nature and objectives" of the organisers, the 105-page document said.
But it said "Israel's decision to board the vessels with such substantial force at a great distance from the blockade zone and with no final warning immediately prior to the boarding was excessive and unreasonable".
Israeli panellist Joseph Ciechanover said in an appendix that he did not agree with that judgment since Israeli soldiers had acted in self-defence.
Turkish panellist Ozdem Sanberk, in a separate appendix, disputed that the blockade was legal or that the flotilla had acted wrongly. "I reject and dissociate myself from the relevant parts and paragraphs of the report," he wrote.
While Israel had no immediate formal comment, one senior Israeli official expressed some satisfaction. "The bottom line is that the Israeli actions were legal," he told Reuters on condition of anonymity.
It was also significant that the report confirmed Israel's right to search ships in international waters, the official said. He said he hoped Israel and Turkey could put the flotilla incident behind them and rebuild their once-strong ties.
Prime Minister Benjamin Netanyahu has voiced regret over the killings. Defence Minister Ehud Barak, a centrist in the conservative coalition government, has stirred debate inside the cabinet by proposing Israel offer a diluted apology in hope of restoring ties with Turkey, once an important Muslim ally.
Mr Barak had also thought such a step would help indemnify Israel's navy personnel against lawsuits abroad.
The report, prepared by a panel headed by former New Zealand Prime Minister Geoffrey Palmer, is expected to be formally handed to UN Secretary-General Ban Ki-moon today and was due to be released then.
But the New York Times yesterday posted on its website a copy it had obtained.