Under the boycott, members of the National Association of Teachers in Further and Higher Education (Natfhe) will not submit articles to Israeli research papers and exchange programmes with Israeli academic institutions involved directly or indirectly in Israeli apartheid policies.
Natfhe is Britain's largest university and college lecturers' union with 67,000 members. Members voted for the boycott at their annual conference on Monday in Blackpool.
The union called for a boycott of those who failed to publicly disassociate themselves from certain policies, including the building of Israel's separation barrier.
However, Trevor Phillips, a union spokesman, said the motion will only act as an advisory policy and will not necessarily be adopted, as the union is to merge this week with the Association of University Teachers (AUT) to become the University and College Union with more than 100,000 members.
Samir Awadh, professor of political science at Bir Zeit University, said: "This is certainly a very important decision. It shows that there are still people in this world who are willing to say no to oppression, racism and apartheid. I salute my British colleagues and I hope this boycott will spread through the European mainland."
Awadh said the decision can be equated in its moral symbolism with the International Court of Justice in the Hague 2004 ruling that said the separation barrier Israel was illegal and ought to be dismantled.
Awni Khatib, professor of chemistry at the University of Hebron, called the union's decision, "a glimmer of hope in a world that is increasingly overwhelmed by coercion, oppression and brute force".
"Israel practices military occupation in its most sinister and evil forms," he said.
"This occupation, which has been going on for nearly 39 years, is nothing short of an act of rape.
"Israel is systematically waging a slow-motion genocide against millions of defenceless people by barring them from accessing work and food. A state as such deserves to be damned, condemned and boycotted."
Khatib rejected arguments by some Israeli academics that Israeli universities and academic institutions had nothing to do with government policies in the occupied territories.
"Israeli universities and colleges assume an effective role in dehumanising and tormenting the Palestinian people. Some of the Israeli universities actually train Shin Bet agents in applying physical and psychological torture on Palestinians."
"Every Israeli academic institution is responsible for the prolongation of this nefarious reign of terror by Israel against the helpless Palestinians"
Awni Khatib, professor of chemistry, University of Hebron
The Shin Bet is Israel's main domestic security service.
"Every Israeli academic institution is responsible for the prolongation of this nefarious reign of terror by Israel against the helpless Palestinians."
According to professor Assad Ghanem, head of the department of government and contemporary political thought at Haifa University, the boycott is unlikely to have a profound effect on Israeli academic institutions.
"The Israeli academia’s movement is toward America, not Europe, but this is not to say that the boycott is insignificant," he said.
The Israeli government said the decision was a "submission to Palestinian propaganda".
Amir Oron, a spokeswoman of the Israeli foreign ministry, said: "This is a very regrettable decision which we believe is politically motivated and goes against academic freedoms. We are studying what to do to confront this decision."
She also said the boycott was hypocritical and that Israel was opposed to the idea of academic sanctions.
"Why don't they boycott Iranian and Saudi universities which are anti-Israeli? Why are they having this fixation on Israel?" she said.
Israel has blacklisted hundreds of Palestinian academics and barred them from travelling abroad or from entering occupied East Jerusalem.
The latest proposal reopened debate sparked last year, when the 40,000-member AUT voted to boycott Israel's Haifa and Bar-Ilan universities for actions which it said undermined Palestinian rights and academic freedom.
That union said it targeted Bar-Ilan University for its links to the College of Judea and Samaria in the West Bank settlement of Ariel.