The other nominees in the category were German film "The Baader Meinhof Complex," French film "Between the Walls," and the Austrian "Revanche."
"Waltz with Bashir," which tells the story of a former soldier struggling to recall suppressed memories from the Lebanon War, succeeded in securing several prestigious film industry awards in the months leading up to the Oscars, including the Golden Globe in January.
This year marked the second in a row in which Israeli films have been nominated in the Foreign Film category, after "Beaufort," another war movie, lost the Oscar last year to Austrian film "The Counterfeiters."
"Waltz with Bashir" is the eighth Israeli film nominated for the Oscar for Best Foreign Language Film, but despite the numerous nominations none has succeeded in grasping the coveted statuette.
The evening's biggest winner was "Slumdog Millionaire," which took the best-picture Academy Award and seven other Oscars, including director for Danny Boyle, whose ghetto-to-glory story paralleled the film's unlikely rise to Hollywood's summit.
The other top winners: Kate Winslet, best actress for the Holocaust-themed drama "The Reader"; Sean Penn, best actor for the title role of "Milk"; Heath Ledger, supporting actor for "The Dark Knight"; and Penelope Cruz, supporting actress for "Vicky Cristina Barcelona."
The Associated Press contributed to the report