"Israel" isn't quite a monolithic entity, but a large number of Israelis did.

In the 1950s, Germany and Israel negotiated a reparations agreement, wherein (West) Germany would compensate Israel (as a representative of the Jewish community at large) for stolen property and for the cost of absorbing refugees, as well as establishing a fund wherein survivors could reclaim their property of get compensated for its loss.

This agreement was ultimately accepted. However, it was bitterly controversial. Despite the explicit note that compensation was for property and costs of refugees, not lives lost, right-wing Israelis saw this as accepting money in exchange for forgiveness of the Nazi crimes. Menachem Begin, a right-wing political leader, gave an impassioned speech denouncing the reparations, arguing that all Germans were responsible for the murders, and should thus not be negotiated with.

Even on the left, the reparations were only seen as a necessary evil. Israel was facing pretty serious economic hardship, with strict rationing and a significant proportion of the population living in temporary housing. The cash from Germany allowed normal economic functioning to begin. But these politicians still didn't like what they were doing--Germany was still the enemy.

Here is a news article on the subject, and here is Begin's speech on the matter. Sadly it hasn't been translated to English.