The Sydney Morning Herald newspaper on Saturday said the diplomat was believed to have been told to leave a few weeks ago, but the move was kept secret to avoid any damage to relations between Australia and Israel.
It said the affair was revealed by the Israeli newspaper Ma'ariv, which speculated it might be connected to last year's row over two alleged Mossad secret service agents accused of trying to fraudulently obtain New Zealand passports.
The Herald said the diplomat's official duties included visiting the two alleged spies while they were in prison in New Zealand.
The newspaper said a source close to the Israeli cabinet had told it the reason for the expulsion had to be serious, given the friendly relations between the two countries.
Australian Foreign Minister Alexander Downer's office did not return calls during the day.
New Zealand deported the two alleged spies in September and suspended high level contacts with Israel.