The retail store received complaints from an Australian Jewish group, resulting in the item being pulled from sale immediately.
Hamas attacked Israel on October 7 and killed 1400, capturing a further 240 people, most of whom remain hostages. This sparked an intense response from Israel, which has resulted in the deaths of more than 10,000 Palestinians, and a further 25,000 injured. Nearly half of those killed were children.
Taking to X, formerly Twitter, the Australian Jewish Association (AJA) said that the blunder was "potentially funny" but said it was "really not a good look."
"K-MART STUFF-UP! Check out the special Christmas bag currently available via K-Mart online," the tweet read. "Yes, it's real! Although this is potentially funny (the AJA committee has tossed around some non-PC jokes) it's really not a good look.
"We suspect some product manager may cause the company some embarrassment. So we've politely written to Wesfarmers corporate suggesting the product be pulled."
A Kmart spokesperson has apologised for the blunder, stating, "We got it wrong on this occasion, and we apologise unreservedly.
"When designing this product, we clearly didn't think through all the implications, and the product has been removed from sale. "
AJA took to X to commend Kmart for responding quickly to the complaint.
"An AJA success — we were just contacted by senior management — the K-mart Ham-Mas bag is being pulled now from the website and all stores."