The star sported a black cape and eyepatch during her performance of 1989 hit Like A Prayer and new single Future, featuring US rapper Quavo.
Madonna defied calls from activists to cancel her appearance in Tel Aviv.
But organisers said the inclusion of Israeli and Palestinian flags in the show was not approved in advance.
Two of her dancers - each wearing a respective flag - walked arm in arm.
'In the live broadcast... two of Madonna's dancers briefly displayed the Israeli and Palestinian flags on the back of their outfits,' a statement from the organisers said following the contest.
'This element of the performance was not part of the rehearsals which had been cleared,' it added. 'The Eurovision Song Contest is a non-political event and Madonna had been made aware of this.'
While some criticised her decision to make a statement, others praised her for using her large platform to make a point.
From BBC News