Israel does not have an embassy in Bolivia, and the nearest ambassador is situated in Peru.
Morales said Wednesday the IDF operation "seriously threatened world peace." He is calling for Prime Minister Ehud Olmert to face criminal charges for the deaths of hundreds of Palestinian civilians.
Morales chided the United Nations' "Insecurity Council" for its "lukewarm" response to the crisis. He called for the UN to hold an emergency general session to condemn the fighting.
He also said Israeli President Shimon Peres should be stripped of his Nobel Peace Prize for failing to stop the operation.
The Bolivian president is known for his alliance with Venezuelan President Hugo Chavez, who announced last week that his country would be expelling Israeli Ambassador Shlomo Cohen in response to the operation in Gaza.
In a speech, Chavez dubbed the fighting a genocide and demanded that US and Israeli leaders be tried in international court. However Chavez did not say explicitly that his country would be severing ties with Israel.
Foreign Ministry officials said Wednesday that Morales' announcement would not affect Israeli tourists currently traveling in Bolivia. An official announcement is planned for later in the evening.
Roi Mandel contributed to this report