In a landmark test case for Israel, the appointment of its next ambassador to Brazil is suddenly in trouble due to his ties to the West Bank settlement movement.

Brazil has reportedly expressed objections to the appointment of Dani Dayan, raising questions about when or even if he will take up the post. The affair has threatened to embarrass Prime Minister Benjamin Netanyahu, who chose Dayan for the job, and reflects growing international impatience over continued Israeli settlement construction on occupied lands claimed by the Palestinians.

On the surface, the controversy has little to do with Dayan's qualifications. A successful businessman, Dayan is affable and eloquent, and being an immigrant from Argentina, familiar with Latin American issues.

But Dayan is also perhaps the world's best-known West Bank settler, serving for many years as the chairman and chief spokesman for the movement. That work, in which he defended settlements on TV screens around the world and spoke out against Palestinian independence, is now threatening to cost him his job.

The Israeli news site Ynet reported this week that Brazil has expressed misgivings over the appointment because of his ties to the settlements.

Brazilian President Dilma Rousseff's office declined comment, as did the Israeli Foreign Ministry and Netanyahu's office. Dayan also refused to comment. But a Brazilian diplomat, speaking on condition of anonymity because the government isn't speaking publicly about the issue, confirmed the report.

Israel is not believed to have had a prominent ambassador who was a settler, although two-term former Foreign Minister Avigdor Lieberman lived in a settlement and is an ultra-nationalist known for his anti-Arab views. If Dayan's appointment is canceled, it would be the first time an Israeli ambassadorial appointment has been scuttled over the settlement issue.

The Brazilian concerns represent the latest sign of growing international displeasure over Israeli settlement construction in the West Bank and east Jerusalem.

The Palestinians claim the two areas, captured by Israel in the 1967 Mideast war, as parts of a future state. The international community opposes Israeli settlements in these territories, saying they undermine the goal of dividing the land between two countries. More than 550,000 Jewish settlers live on occupied land.

Israel has long brushed aside international criticism of settlement construction, arguing that the matter should be resolved in negotiations with the Palestinians. But the international community has grown increasingly impatient.

The United Nations General Assembly in 2012 accepted Palestine as a nonmember observer state, a largely symbolic act that recognized its borders along the pre-1967 lines. An international movement that advocates a boycott of Israeli settlement products has begun to gain steam and European Union officials say the bloc is in the final stages of a plan that would explicitly label settlement products exported to Europe.

Brazil's opposition isn't surprising. Its leaders in recent years have been vocal advocates of the Palestinian cause.

In 2010, the Brazilian government recognized the state of Palestine along the pre-1967 lines. Under Rousseff's leadership, Brazil also voted in favor of Palestine in the 2012 vote at the U.N., and last year, it recalled its ambassador from Israel to protest the country's military offensive against Islamic militants in the Gaza Strip.

An Israeli Foreign Ministry spokesman subsequently called Brazil a "diplomatic dwarf," angering the Brazilians and forcing Israel's president to issue an apology.

Despite these ideological differences, Israel and Brazil enjoy strong trade ties, with fast-developing Brazil showing interest in key Israeli technologies.

When Netanyahu appointed Dayan last month, he said Latin America "is one of the main objectives" for Israeli trade growth. "I am confident that Dani Dayan will bring to the post his considerable experience and will deepen relations between Israel and Brazil," he said at the time.

Netanyahu, a longtime supporter of the settlements, now finds himself caught between his loyalties to a key constituency and the need to preserve ties with an important trade partner.

It remains unclear how the matter will be resolved. While Dayan's appointment has been approved by the Israeli Cabinet, Israel, apparently fearing rejection, has not yet asked Brazil for permission to send him.

The two countries, wary of a public confrontation, are discussing the matter behind the scenes before Israel decides whether to press forward with the appointment or not. It is not known how hard Israel will press the matter or how strong the Brazilian opposition is.

The controversy has been fueled in part by a similar debate at home, where liberal Israelis have grown increasingly alarmed over Israel's growing international isolation over the settlement issue. Netanyahu's critics claim that nearly 50 years of occupation is hurting Israel's international standing. Some say continued settlement growth is effectively making Israel inseparable from the Palestinians, putting the country on the way to a binational identity in which Arabs could one day outnumber Jews.

Dayan lives in a settlement and is secular, which has helped boost his appeal with broader audiences because he breaks the stereotype of religious zealot settlers.

Three former senior Israeli diplomats announced this week that they have met with Brazilian officials to lobby against Dayan's appointment.

Alon Liel, a former director general of the Foreign Ministry, said the group spoke to the Brazilian ambassador and said that accepting Dayan would give legitimacy to the settlements. He declined to say how Brazil responded.

Liel's efforts drew a stern warning from Israel's defense minister, Moshe Yaalon, who accused him of hurting Israel's international image.

"These attempts by elements among us to defame Israel in this negative way are embarrassing, dangerous and ugly," Yaalon said.

Liel said this is not the first time that he and others have sought foreign intervention in Israeli affairs. He said there already is a strong trend in Europe of "differentiation" between Israel and the settlements.

"And here Brazil enters the eye of the storm," he said.

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Associated Press writer Brad Brooks in Rio de Janeiro contributed to this report.