President Evo Morales announced the move during a talk with a group of educators in the city of Cochabamba.
It "means, in other words, we are declaring (Israel) a terrorist state," he said.
The treaty has allowed Israelis to travel freely to Bolivia without a visa since 1972.
Morales said the Gaza offensive shows "that Israel is not a guarantor of the principles of respect for life and the elementary precepts of rights that govern the peaceful and harmonious coexistence of our international community."
More than three weeks of Israeli air, ground and naval attacks on Gaza have left over 1,300 Palestinians dead and 7,000 wounded.
In the latest massacre, at least 16 people were killed after two Israeli shells slammed into a United Nations school while refugees were sleeping, killing men, women and children and drawing international protests.
Bolivia broke off diplomatic relations with Israel in 2009 over a previous military assault on Gaza.
In mid-July, Morales filed a request with the UN High Commissioner for Human Rights to prosecute Israel for crimes against humanity.
(AFP)
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