Ambassador Ilan Mor said in a statement that Ferenc Szaniszlo's award was given "to the wrong person for the very wrong reasons."
"His ideas do not belong in a free and democratic society like the one in Hungary," Mor said. "While Israel and Hungary are cooperating in fighting against anti-Semitism, such awards might cause (a) negative impression and lead us to the wrong direction."
The ambassador accused Szaniszlo of "spreading anti-Semitic conspiracy theories against Israel." The journalist denied he had made anti-Semitic comments.
In comments made on his show on Echo TV in 2011, Szaniszlo said Gypsies – or Roma – are monkeys and implied that Jews and Roma have carried out anti-Hungarian activities.
In a clip of one of his programs from 2010, posted on YouTube, Szaniszlo said Israel had been created by the West as a bastion against Arab-Muslim countries, but that it would lose its importance as such once the region's oil and gas run out.
"The Western world needs to reckon with... emptying Israel," Szaniszlo said in the video. "... It can be expected that the Jewish population from Israel... will need to be gradually relocated to Europe and the United States."
Szaniszlo said he would not return the award.
"This is not anti-Semitism at all. Whenever someone dares to criticize the policies of Israel, then that person is listed as an anti-Semite immediately," he told Reuters.
'Decision an insult to our past'
Nils Muiznieks, human rights commissioner at the Council of Europe, said he was concerned by Hungary's decision to give awards to Szaniszlo and two other people, all of whom, he said, "have made no secret of their anti-Semitic and racist views."
"Giving the annual Tancsics prize to a journalist notorious for his positions against Jewish and Roma people, as well as medals to a singer of an extreme right, nationalist music band and to an archaeologist known for his theories clearly tainted by anti-Semitism is an insult to our past and flies in the face of European and democratic values," Muiznieks said in a statement.
Hungary gave awards to some 200 academics, journalists and artists to mark a national holiday last week.
Minister of Human Resources Zoltan Balog said he was unaware of Szaniszlo's remarks and regretted giving him the Mihaly Tancsis award, but said he did not have the power to take it back.
"Had I been aware of these views, I would not have accepted the proposal (for the award). As regulations do not allow to withdraw awards, I can only express my regret over a bad decision," Balog said in a statement.
Several earlier recipients of the Tancsis award said they would return the prize because they did not want to be associated with Szaniszlo, who was honored on Friday, even though a panel of journalists advising Balog had not supported the decision.
Hungary's far-right party Jobbik, which has been vocal against Roma and Jewish people, has 43 seats in parliament. Prime Minister Viktor Orban's center-right government has condemned the party's rhetoric.
The Associated Press and Reuters contributed to this report