NSW Premier Barry O'Farrell has told the Greens-run Marrickville Council to drop its boycott of Israel or face the sack.
In a letter to Greens Mayor Fiona Byrne, Mr O'Farrell threatened to use his powers under the Local Government Act to move against the Sydney council if it did not comply.
In the letter, the premier gave the council a 28-day deadline.
Ms Byrne may lose her job if she doesn't back down.
The warning comes after a report claimed the authority's controversial sanctions could end up costing taxpayers $4 million.
Marrickville Council voted in December to back the Global Boycott, Divestment and Sanctions (BDS) movement, which boycotts all products said to be directly or indirectly associated with Israel.
A council business paper declared the sanctions could end up costing taxpayers $4 million if all the recommendations contained within the document were adopted.
More than $3 million of that would come from replacing all the authority's Hewlett Packard computers, which the BDS website claims are used at Israeli military checkpoints that restrict the movement of Palestinians.
Other hardware may need to be replaced and contracts cancelled.
Ms Byrne released a statement yesterday saying she will not support all the recommendations and therefore taxpayers would not be financially disadvantaged.
Originally published as O'Farrell gives Marrickville ultimatum