The president of the Central Council of Jews in Germany, Dieter Graumann, told the Kölner Stadt-Anzeiger regional daily the protests were all the more disturbing coming from Jews.
"The pictures shocked me. And I was even ashamed that Jews of all people should do such a thing, giving a distorted image of the Holocaust," he said.
"We Jews in Germany always say that one should never abuse the memory of the Holocaust. If now Jews are doing that, it is particularly disgraceful," added Graumann, whose own parents were interned in concentration camps.
The demonstration at the weekend in the ultra-Orthodox Jerusalem neighbourhood of Mea Shearim attracted hundreds of men and boys, some wearing yellow stars and others the striped uniforms of the Nazi death camps.
The rally was called to protest the jailing of a man who led vigilante attacks against a neighbourhood religious bookshop accused by community hardliners of selling non-religious books.
But ultra-Orthodox news website Kikar Hashabbat said the demonstration was a response to media criticism in recent weeks of the community and its attempts to enforce gender segregation.
Kikar Hashabbat said demonstrators donned yellow stars, which Jews in Germany and countries occupied by the Nazis were forced to wear to identify themselves in public, as "an exceptional protest measure."
However, Graumann stressed the protesters were "only a very small fraction of society in Israel, which is radical and is producing these abhorrent images."
"This is not representative of Israeli society, which is generally characterised by a spirited love of life," added the president.