Tsuriel Raphael has been removed from his post and the Foreign Ministry has begun searching for a replacement, said spokeswoman Zehavit Ben-Hillel.
Two weeks ago, El Salvador police found Raphael naked outside his residence, tied up, gagged and drunk, Israeli media reported. He was wearing several sex toys at the time, the media said. After he was untied, Raphael told police he was the ambassador of Israel, the reports said.
Ben-Hillel said the reports were accurate and that Raphael has been recalled, although he did not break any laws.
"We're talking about behavior that is unbecoming of a diplomat," she said.
The ambassador did not file a police complaint in the incident, she said.
Raphael had served for six months as the ambassador in El Salvador and for several years at different missions around the world, she said.
The embarrassing affair was one of several involving Israeli diplomats in recent years. In 2000, Israel's ambassador to France died of cardiac arrest in a Paris hotel under circumstances the Foreign Ministry refused to publicize. Media reports said he was with a woman who was not his wife at the time.
Last year, Israel replaced its ambassador to Australia, Naftali Tamir, after he said Israel and Australia are "like sisters" because both are located in Asia and their peoples don't have the Asian characteristics of "yellow skin and slanted eyes."
In 2005, Israel canceled the appointment of a diplomat to Australia after it was discovered that he published pictures of nude Brazilian women on the Internet while on a mission in Brazil.