With Israelis and Palestinians locked in conflict over national claims on the same land, the provenance of the film Paradise Now is as combustible an issue as its plot before the 5 March ceremony, which will be watched by millions worldwide.
Paradise Now, a drama about two young men from the occupied West Bank recruited to blow themselves up in Tel Aviv, is up for the Oscar in the best foreign film category.
Many Israelis were irked when the Academy of Motion Picture Arts and Sciences, in publishing the nomination, said Paradise Now came from Palestine.
While the tag remains on the academy's website, an Israeli diplomat said he expected the film to be described as coming
from the Palestinian Authority during the awards ceremony.
"Both the Israeli consulate in Los Angeles and several concerned Jewish groups pointed out that no one, not even the Palestinians themselves, have declared the formal creation of Palestine yet, and thus the label would be inaccurate," the
diplomat told Reuters on condition of anonymity.
The film involved Palestinian crews, an Israeli producer and European funding.
Yedioth Ahronoth, Israel's biggest daily, said on Sunday that the Israeli consulate in Los Angeles and local Jewish groups were urging the academy to reconsider the national label.
According to the report, organisers of the ceremony agreed to provide an unspecified alternative provenance for the film.
The academy could not immediately be reached for confirmation. Israel's Foreign Ministry declined to comment.
Palestinians seeking independence in the West Bank and Gaza Strip, which Israel captured in the 1967 Middle East war, won limited self-rule under interim peace accords that formed the Palestinian Authority.
Major Israeli cinema chains have shunned Paradise Now, with distribution experts citing concerns that few Israelis will turn out to watch it.
Palestinians have mostly responded well to the film, although some voiced misgivings at its portrayal of a bomber who undertakes his deadly mission because of social pressure as well as the call to get revenge against Israeli occupation.
The controversy around Paradise Now compounds an already fraught Academy Awards for Israel, thanks to several nominations garnered by Steven Spielberg's Munich.
The film, a thriller about the reprisals Israel launched after 11 of its athletes died in a Palestinian raid on the 1972 Olympic Games, has been accused by pro-Israel groups of skewing history and criticising Israeli security policies.
Spielberg called the film his "prayer for peace".