The flag, according to them was put up in conjunction with the 'World Stewardess Contest'.
They were incensed on the account of Israeli aggression against Muslims in Palestine and thought that Israelis were allowed to participate in an event here.
In response to this, representative from Mimpian Jadi Resort said that the flag was part of props used by people from China who rented their resort for a film shoot early this year.
The movie which aims to promote Sabah will be released this year in April.
Even Minister of Tourism, Culture and Environment, Datuk Seri Masidi Manjun was there early this year to welcome the film crew from China.
"After the film shoot, we did not take down the props including the flag.
We did not realise the flag of Israel was one of them.
After it was pointed out to us, we took it down. We were unaware of it."