Three people complained the ad was offensive because Palestinians in Israel were excluded from some areas of daily life and restricted in movement.
The Advertising Standards Authority concluded that the statement was a reflection of the population mix of the country and not that the population lived in “harmony and equality”.
The magazine ad trumpeted the number and variety of restaurants in the Israeli city of Tel Aviv.
A second complaint that the claim “the masses have always been well fed in Israel” was offensive was also dismissed.
The ruling is the second to involve Israel and Palestine in as many weeks. An ad by the Palestinian Diplomatic Mission was banned earlier this month for erasing the state of Israel.
In 2009, the watchdog banned an Israeli Government Tourist Office poster for “misleadingly” implying that the disputed West Bank, Gaza Strip and Golan Heights areas were internationally recognised as part of Israel.