Sebastien Delogu, a member of parliament for the radical left France Unbowed (LFI) party from the southern city of Marseille, stood up with the flag during questions to the government.
Parliament speaker Yael Braun-Pivet denounced what she called his unacceptable behavior, and lawmakers voted to suspend him for two weeks and cut his parliamentary allowance by half for two months.
Delogu left the lower chamber making a V-sign for victory, as right-wing and centrist lawmakers inside applauded the sanctions against him.
His suspension came on the day Spain, Ireland and Norway formally recognized Palestinian statehood in a coordinated decision that has infuriated Israel.
Their move brings to 145 out of the 193 U.N. member states that have recognized a Palestinian state.
But no member of the Group of Seven industrial powers – including France, the United Kingdom and the United States – have done so.
French President Emmanuel Macron in February said recognizing a Palestinian state was no longer "taboo."
But Prime Minister Gabriel Attal in the lower house on Tuesday dodged a question from another LFI member of parliament about whether France would soon join its European allies in doing so.
The latest Gaza war has sparked tensions in France, a country with the largest Jewish community of any country after Israel and the United States, as well as Europe's biggest Muslim community.
Israel's attacks killed at least 36,096 people in Gaza, mostly civilians.
