Doron Almog, who formerly commanded Israeli troops in the Gaza Strip, avoided arrest on the warrant by returning to Israel without leaving the plane that had landed in London on 11 September.
Kate Maynard, a member of the legal team representing Palestinians whose houses were demolished by Israeli troops and whose relatives were killed in a bombing raid, said on Monday: "The police have returned the warrant to the court unexecuted.
She added: "And the court has withdrawn the warrant, given that Almog is no longer in the jurisdiction. However, the fact that the warrant has been withdrawn does not mean that it cannot be reissued."
Maynard's firm Hickman and Rose is pressing the Foreign Office and British police to explain how Almog was allowed to leave without being arrested.
"We now know that Almog was tipped off and the police didn't board the plane and arrest him," she said.
"We're pressing the police in conjunction with the Foreign
Office for an urgent inquiry to demand how he got away," Maynard added.
Israeli army chief Dan Halutz is
also in some UK activists' sights
"We're asking them to investigate the criminal liability of any embassy staff that helped him evade jurisdiction," Maynard said.
She said she was not aware of any legal reason preventing the police from boarding the plane to arrest him.
Maynard said the warrant for Almog's arrest had been issued by a court in London based on allegations that he had ordered the demolition of homes in the Gaza Strip.
Lawyers also presented evidence over his role in a 2002 bombing raid that killed 15 Palestinians, nine of them children, though no warrant was issued in that particular case, Maynard said.
In Jerusalem, media reported on Friday that Prime Minister Ariel Sharon had complained to his British counterpart Tony Blair in New York last week about legal proceedings against senior Israeli officers in Britain by noting that he could be arrested himself on any visit to London.
Meanwhile Israel's Justice Ministry has set aside about $1 million for legal aid to army officers who could face war crimes charges in European courts, an official said Monday.
"The court has withdrawn the warrant, given that Almog is no longer in the jurisdiction. However, the fact that the warrant has been withdrawn does not mean that it cannot be reissued"
a member of the legal team representing Palestinian victims
Justice Minister Tzipi Livni met on Sunday with officials from the Defence Ministry, the Foreign Ministry and the Shin Bet security services after Doron Almog, a retired general, could not enter London for fear police would arrest him.
The arrest warrant against Almog has since been cancelled.
Livni set aside the special legal budget and established a team to study European laws - such as the British legislation - that allow countries to charge people with war crimes even if they were not committed against their nationals, said Shai Ben-Maor, Livni's adviser.
The real goal, however, is to persuade European governments to amend or overturn such laws, because Israel believes they are being used for political purposes, he said.
Complaints have also reportedly been filed with London police against army chief, Lieutenant-General Dan Halutz, and his predecessor, Moshe Yaalon.
Almog, Halutz and Yaalon all served as generals in 2002 when Israel's air force dropped a one-tonne bomb on the home of a Palestinian resistance leader, Salah Shehadeh, killing him and 14 others, including nine children. Shehadeh was said to have been a Hamas commander.
The Gaza-based Palestinian Centre for Human Rights and an Israeli left-wing group were involved in filing the complaints in London.