The CRIF umbrella group of French Jewish organisations accused the French government of failing to protect citizens from broadcasts by the Hizb Allah's Al-Manar TV, which CRIF says includes anti-Semitic films that incite Muslims to attack Jews.
"We French citizens are under attack as Jews by this television," CRIF president Roger Cuikerman said on Friday.
Arabic-language satellite television is popular with France's five million Muslims, mostly of North African descent.
List of conditions
Al-Manar angered groups representing France's 600,000 Jews last year when it broadcast a series about a Zionist plot to dominate the world during the high-viewing, month-long Muslim fast of Ramadan.
CRIF had sought to ban Al-Manar and condemned this latest decision by France's Higher Audiovisual Council (CSA) to allow it to keep broadcasting over French satellite operator Eutelsat.
"We French citizens are under attack as Jews by this television"
"The republic should protect all its citizens and not give in to external pressures," Cuikerman said in a statement.
The CSA announced the agreement with Al-Manar in a document containing a long list of commitments to unbiased journalism that Al-Manar must accept to continue broadcasting.
In its statement, the CSA declared that some broadcasts it had viewed broke French law because they could incite hate or violence against people for religious or national reasons and stoke tensions between different groups living in Europe.
"Your signature on this agreement implies that you formally renounce broadcasting such programmes on a signal using a satellite subject to French law," the CSA statement said in an address to Al-Manar's management.
Al-Manar said in a statement that it had "no problem with French laws and that it was prepared to comply with the legal requirements to broadcast in French territory".
The CSA took Al-Manar to court last August after its drama The Diaspora, which depicts a Zionist plot to dominate the world, provoked uproar. It called the programme intolerable.
Hizb Allah was instrumental
in driving Israel out of Lebanon
The court ruled the CSA could ban the station only if it refused to apply for authorisation, but Al-Manar applied for it.
Al-Manar's head of news, Hasan Fadl Allah, in Beirut, said he did not foresee any change following the agreement.
The Diaspora series was "a special case and it does not follow that all of Al-Manar's programmes are similar to this type of series", he said.
The United States and Britain classify Hizb Allah, which is hugely popular with many Muslims, as a "terrorist" group but France does not.
Hizb Allah was instrumental in helping to force Israeli troops to withdraw from south Lebanon in 2000 after a 22-year occupation.