The Evening News revealed last week that French multi-national Veolia had failed to make a short list of firms in the running for environmental services that include rubbish collection, street cleaning and ground maintenance.
Council chiefs say it missed out because it didn't score enough points in an evaluation process.
Mick Napier, chairman of the Scottish Palestine Solidarity Campaign, said it was "a victory for human rights".
He said: "We have a duty to stand with the Palestinians and against the Israeli occupation."
Green councillor Maggie Chapman said: "It is not enough to use warm words in support of Palestinian people; we have to act on our convictions."