Chairperson of the African Union Commission, Moussa Faki Mahamat, made the remarks on Sunday, a day after an Israeli delegation was forced out of the opening ceremony of the AU summit in the Ethiopian capital city of Addis Ababa.
Faki had granted the Israeli regime the status in 2021, sparking an outcry across the pan-African bloc and vehement protests from key members, Algeria and South Africa.
As a result, last year's AU summit suspended a debate on whether to withdraw the accreditation of Israel, and established a committee of heads of state to address the issue.
"That means that the (observer) status (of Israel) is suspended until such time as this committee can deliberate...and so we did not invite Israeli officials to our summit," Faki said, adding that an investigation was being conducted.
The Israeli regime has shown a fiery reaction to the Saturday incident that has gone viral across social media showing security guards approaching the Israeli delegates and escorting them out after several minutes of argument.
The regime accused what it called a "small number of extremist states like Algeria and South Africa" of being behind the move.
South Africa, however, has roundly rejected the claim, saying Tel Aviv's application for observer status at the AU has not been decided upon by the bloc.
"Until the AU takes a decision on whether to grant Israel observer status," it cannot have the regime "sitting and observing," Clayson Monyela, head of public diplomacy in South Africa's Department of International Relations and Cooperation, told Reuters.
"So, it's not about South Africa or Algeria, it's an issue of principle," he added.