Foreign affairs spokeswoman Julie Bishop said she was sceptical about the Prime Minister's comments.
She said if Ms Gillard were serious in her objections, "she should have spoken out against the actions of the union movement and the Greens, her former alliance partners" to the BDS movement.
Ms Gillard said through a spokeswoman on Monday: "This campaign does not serve the cause of peace and diplomacy for agreement on a two-state solution between Israel and Palestine."
The comments came as students at Israel's Technion, named sixth in innovation and entrepreneurship among universities worldwide in a survey by the Massachusetts Institute of Technology, called on their Sydney University colleagues to reverse their support for BDS.
"The student population includes students from Israel's various minorities, and nearly a fifth are Arab students from across the country," the board of the Technion Students Association wrote to the Sydney University Student Representative Council.
"Side by side, Arab, Jewish and international students study, work and engage in extra-curricular activities."
A planned student BDS rally ended up a damp squib yesterday, with journalists, police and security guards nearly outnumbering protesters.
The University of NSW protest against a planned Max Brenner chocolate shop on campus came after anti-Semitic posts appeared on the rally's Facebook page, posts that organisers of the rally disowned.
Only about 30 protesters marched under the banner Students for Justice in Palestine.
There was no anti-Semitic rhetoric in the speeches delivered by speakers including SJP spokesman Damian Ridgwell, two Palestinian students, and National Union of Students national queer officer Cat Rose. Ms Rose said BDS was "something extraordinarily relevant" for students.
She praised her Sydney University colleagues for their support of BDS.
Another speaker, UNSW student Bec Hynek, described herself as an "anti-Zionist Jewish activist".
"I stand alongside a growing number of Jewish supporters of the BDS who don't want to support oppression of Palestinians."
About a dozen Australian Jewish and Israeli students watched on, with some heckling the speakers with remarks like "what's chocolate got to do with politics?"
Max Brenner is a brand name of the Strauss Group, an Israeli food and beverage company that supplies some rations to the army. In a statement yesterday, local management said it had no direct connection to the Strauss Group.
NSW Jewish Board of Deputies chief executive Vic Alhadeff said the paltry turnout was an encouraging signal that students at UNSW :don't respond to crude theatrics and blatant politicising of what is nothing more sinister than a chocolate shop".
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