South Africa Rugby announced on Friday that it had withdrawn an invitation to Israeli club Tel Aviv Heat to compete in a second-tier competition from March 24.
On Thursday, a press release from the national body said Heat plus teams from Spain, Kenya, Namibia and Zimbabwe and six South African sides would take part.
However, SA Rugby informed Tel Aviv 24 hours later that the invitation for them to take part had been withdrawn. A Mexican side could replace the Israelis.
South African Rugby president Mark Alexander said the decision had been taken after "we listened to the opinions of important stakeholder groups".
"We have taken this decision to avoid the likelihood of the competition becoming a source of division, notwithstanding the fact that Israel is a full member of World Rugby and the IOC."
Diplomatic relations between South Africa and Israel are strained, according to the international relations department in the republic.
"There is currently limited political and diplomatic interaction between South Africa and Israel," says the department.
"(This is) due to Israel's antagonistic attitude towards the Middle East peace process and disregard for international law regarding the rights of the Palestinians and their territories."