Israel's highest Jewish body sent a letter to the Holy See expressing "sorrow and pain" at the papal decision. "It will be very difficult for the chief rabbinate of Israel to continue its dialogue with the Vatican as before," the letter said. Chief rabbis of both the Ashkenazi and Sephardic Jews were parties to the letter.
The rabbinate, which faxed a copy of the letter to The Associated Press, also canceled a meeting with the Vatican set for March. The rabbinate and the state of Israel have separate ties with the Vatican, and Wednesday's move does not affect state relations.
Pope Benedict XVI, faced with an uproar over the bishop, said Wednesday he feels "full and indisputable solidarity" with Jews and warned against any denial of the full horror of the Nazi genocide.
The remarks were his first public comments on the issue since the controversy erupted Saturday.
The Vatican spokesman, the Rev. Federico Lombardi, said the Vatican hoped that in light of the pope's words, "the difficulties expressed by the Israeli Rabbinate can be subjected to further and deeper reflection."
Lombardi expressed hope that dialogue between the two parties can continue "fruitfully and serenely."
Oded Weiner, the director general of the chief rabbinate's office, welcomed the pope's remarks, calling them "a big step toward reconciliation."
With his comments, the pope reached out to Jews angered by his decision to rehabilitate bishop Richard Williamson, who told Swedish TV in an interview broadcast last week that evidence "is hugely against 6 million Jews being deliberately gassed." He said 300,000 Jews were killed at most, "but not one of them by gassing in a gas chamber."
About 6 million Jews were systematically murdered by the Nazis and their collaborators during World War II. Many were gassed in death camps while others were killed en masse in other ways, including shooting and starvation. About 240,000 Holocaust survivors live in Israel.
Jewish groups, including the American Jewish Committee, the Simon Wiesenthal Center and Israel's quasi-governmental Jewish Agency, denounced the Vatican for bringing a Holocaust denier back into the fold.
The Vatican quickly distanced itself from Williamson's comments and said removing the excommunication by no means implied the Vatican shared his views.
Williamson and three other bishops were excommunicated 20 years ago after they were consecrated by an ultraconservative archbishop without papal consent — a move the Vatican at the time called an act of schism.
Benedict said Wednesday he had lifted the excommunication because the bishops had "repeatedly shown their deep suffering over the situation."
The German-born Benedict expressed his "full and indisputable solidarity" with Jews.
He recalled his visits to the Auschwitz death camp — including as pope in May 2006 — and the "brutal massacre of millions of Jews, innocent victims of blind racial and religious hatred."
The Vatican and the rabbinate launched formal relations in 2000 when Pope John Paul II visited Jerusalem. Since then, delegates from the Holy See and the rabbinate have met twice a year to discuss religious issues. This is the first time ties have been severed.
The Vatican and the state of Israel have had their own relationship since establishing diplomatic ties in 1993.