The court also ordered the French flagship carrier to pay €3,000 in damages to the passenger and her legal fees.
Horia Ankour, a nursing student, had attempted to fly to Israel from France last April to take part in the "Welcome to Palestine" campaign, which saw hundreds of activists seek access to Israel in a bid to travel to the Palestinian territories.
Europe's main airlines faced a wave of passenger fury during the campaign after cancelling some 300 tickets following heavy Israeli pressure.
Ankour was taken off the plane in the southeastern city of Nice after an Air France employee asked whether she had an Israeli passport and then, when she replied "no", whether she was Jewish.
When the 30-year-old answered "no" again she was escorted from the flight.
French prosecutors had backed her in the case, saying it was a clear case of discrimination.
Air France had said her name was on a list of undesirables provided by Israeli authorities and it was certain she would not be allowed into the country.