The six-member board voted 4-2 against the proposal, saying that it was not consistent with its boycott policies.
An estimated 175 people attended the board meeting at the Quimper Universalist Unitarian Fellowship hall in Port Townsend.
The proposal sought the removal of several Israeli-made products from the co-op's shelves "until Israel stops violating international law and the rights of the Palestinian people."
"We have heard a great deal of impassioned testimony tonight," said board member Rick Sepler, who made the motion to reject the proposal.
"It came from people who really believe what they are saying, but I don't think it is the co-op board's responsibility to weigh in on these international issues."
The core of Sepler's motion was that the policy, which allows "a refusal to purchase and/or carry a product or company's product line that is not consistent with the Food Co-op's mission statement and principles" cannot be applied to a country.
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