France was one of the first countries to comply with a 2015 European Union instruction to put a label indicating the provenance of goods from settlements on the West Bank and the Golan Heights, which have been occupied by Israel since 1967.
The measure principally affects food, wine and cosmetics.
Israel slammed the decision and the Jewish umbrella group Crif attacked it as "discriminatory", claiming that it would strengthen the Boycott, Disinvest and Sanctions (BDS) movement, "which pours hatred and detestation on Israel".
In 2015 the appeal court endorsed two fines on BDS activists, leading the Crif to describe the boycott call as illegal.
Another group, the European Jewish Organisation, and the kosher wine company Psagot appealed to the Council of State to annul the decision.
On Wednesday the Council of State suspended its decision on the matter until the European court has ruled on whether European law makes such labelling obligatory.