The cartoonist, Dieter Hanitsh, defended his work, saying he has the right to criticise Netanyahu's policies. The cartoon was published a day after Israeli troops shot dead dozens of Palestinians during Nakba protests on the Gaza-Israel border.
German newspaper Sueddeutsche Zeitung said it had ended its decades-long collaboration with cartoonist Dieter Hanitzsch after his depiction of Israeli Prime Minister Benjamin Netanyahu.
The cartoon showed Netanyahu in the attire of Israeli Eurovision entrant Netta Barzilai, who won the 2018 contest on Saturday.
Holding a rocket with the Star of David on it in one hand and a microphone in the other, Netanyahu is shown in the cartoon saying: "Next year in Jerusalem."
The 85-year-old cartoonist said he wanted to criticise Netanyahu's exploitation of the Eurovision contest for his own purposes and accused Netanyahu of abusing the singer's victory.
Netanyahu used the phrase, the toast traditionally given each year during the Jewish festival of Passover, in a congratulatory tweet. "You brought a lot of respect to the State of Israel," he wrote. "Next year in Jerusalem!"
Hanitzsch told German broadcaster RND on Thursday that he found Netanyahu's phrase "problematic ... It really does not help to pour even more oil onto the fire."
But editor-in-chief of Sueddeutsche Zeitung Wolfgang Krach told the same broadcaster that he saw the cartoon as anti-Semitic and that the newspaper had ended its relationship with the cartoonist.
Hanitzsch told German online news provider t-online.de he had been unfairly treated. He said the newspaper's editors had approved a draft he submitted before they commissioned the cartoon, and then welcomed the final product.
"I didn't sneak the drawing into print," he said.
Krach said publishing the cartoon, carried in the May 15 issue of the daily, was a mistake and he apologised to readers.
The cartoon was published just a day after Israeli troops shot dead dozens of Palestinians during Nakba protests on the Gaza border, drawing strong international condemnation.
It attracted even greater attention in the context of the relocation of the US Embassy from Tel Aviv to Jerusalem that weekend.