Sinn Fein city councillor Michael Mac Donncha claims he was unaware of the ban when he arrived in Israel on Tuesday night.
The country's authorities are investigating how he slipped through immigration after he was banned because of his support for the Boycott, Divestment and Sanctions movement (BDS).
The campaign calls for Palestinian refugees to be able to return to land inside Israel.
President Benjamin Netanyahu's government claims it is motivated by anti-Semitism and that it opposes the country's very existence.
Interior minister Arieh Deri ordered an inquiry after Mr Mac Donncha announced he was in the city of Ramallah for a conference.
Israeli daily newspaper Haaretz reported that the ban order sent to airport immigration officials misspelled Mac Donncha's name.
He did therefore not show up on the watch list.
Mr Deri had written on Twitter before his arrival: "The mayor of Dublin wants to enter Israel so that he can incite against us.
"He will not enter!"
A short while later Mr Mac Donncha announced that he was already in the Palestinian city of Ramallah, where he had been invited to attend a conference on the disputed status of Jerusalem.
Haaretz reported that he has ties with the Ireland Palestine Solidarity Campaign, which promotes a boycott of Israeli businesses and foreign firms who trade in the Jewish state.
The paper said Israel's interior ministry and strategic affairs ministry blamed each other for the mix-up.
Mr Deri said an "inquiry is essential to avoid such breakdowns in future", adding that when Mr Mac Donncha heads home he will be given a letter forbidding him from entering Israeli territory in future.
Dublin City Council passed two resolutions endorsing the BDS movement on Monday.
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