Ambassador Hillel Newman was summoned to Parliament House on Thursday by Foreign Minister Penny Wong for a diplomatic dressing down.
"We express deep sorrow and grief with the family of Zomi Frankcom, and I'd like to tell them straightforward: we we grieve with you," he told reporters.
"We are sorry for the circumstances that brought about this death."
Dr Newman said the aid convoy decided to put armed personnel on it without telling Israel, and deviated from the pre-approved route.
"One cannot attack findings of a court if the findings are not suitable to one's political agenda," he said.
"The findings of the court came to the conclusion after two years of independent research that there's no criminal liability. We must respect that, as we do in every case of a investigation."
The Israeli ambassador was driven in through the back entrance to parliament as part of a convoy of black cars.
He said "mistakes" were made both the aid convoy and the Israeli military.
Dr Newman declined to apologise for Ms Frankcom's death on behalf of Israel, saying it could imply criminal responsibility.
He didn't rule out a potential appeal of Israel's decision.
Senator Wong said the Israeli government's decision not to pursue criminal proceedings against those responsible for killing the Australian and her World Central Kitchen colleagues fell "far short of the accountability we expect".
"(I) have directed Australia's ambassador to Israel to convey our views directly to Israel as the Australian government considers next steps," she said.
Israel's military announced overnight it had completed reviews of 150 incidents of troop conduct in Gaza and made decisions on five cases, including the April 2024 attack on an aid convoy that included Ms Frankcom.
There was "no reasonable suspicion of criminal misconduct that would justify the opening of a criminal investigation", the statement reads.
Senator Wong said the government learned of Israel's decision moments before it was announced, on World Humanitarian Day, which was especially insulting to Zomi's loved ones, humanitarians and all Australians.
"Democracies seek and accept higher standards," she said.
"The Australian government will not stop pressing Israel for justice for Zomi and her colleagues."
The World Central Kitchen convoy was marked as supplying aid when it was struck in Khan Younis, southern Gaza.
The Israeli military initially claimed the convoy was being used by Hamas, before later acknowledging it had been misidentified and admitting errors in the decision-making process before the attack.
Two Israeli officers were dismissed from their positions and three senior officers were formally reprimanded, according to the Israel Defense Forces.
Calls have grown for Israel's ambassador to be expelled following the findings.
Former human rights commissioner and member of a UN commission on Palestine and Israel said Senator Wong needed to tell Mr Newman to leave the country.
"I don't support breaking diplomatic relations with Israel. I don't support the closing of embassies, but this bloke is clearly an unacceptable representative so far as Australia is concerned, and he should be sent home," he told ABC Radio.
In a statement, World Central Kitchen said it fundamentally disagreed with the Israeli military prosecutor's decision about a criminal investigation into the IDF airstrikes that killed its team.
"There has never been any excuse or justification for the attacks and there is nothing in this account that does so," the organisation said.
"The decision is inconsistent with the full truth and deeply offensive.
"We continue to demand an independent commission to investigate the air strikes because the IDF cannot credibly investigate its own conduct."
