The tánaiste was speaking as the government came under pressure to stop importing goods and services from illegally occupied territories after a bill made progress in the Seanad yesterday.
In order to become law, the bill still must pass through several obstacles.
Sinn Féin Senator Niall Ó Donnghaile described the vote as a "momentous step" towards officially banning the import of goods from illegal settlements.
Welcoming the historic vote Chairperson of IPSC and Palestinian-Irish citizen, Fatin Al Tamimi thanked Senators who supported the historic Bill and encouraged Senators to continue their support until the the Bill reaches the final stage.
The Bill, which was opposed by the Irish Government, will now go to the lower chamber of the Irish Parliament to be debated.
"The Irish government has consistently opposed the policy of Boycott Divestment and Sanctions in relation to Israel and we regularly say this publicly", she said.
Israeli Ministry of Foreign Affairs, for its part, slammed the vote, saying it has supported "populist, risky and extremist" anti-Israel boycott initiative.
The colonies, considered illegal under global law, are constructed on Palestinian land in the West Bank in order to annex territory for the state of Israel.
Legally, he said the Bill was in contravention of European Union law which did not permit a nation-state to take action on global trade which was out with European Union policy, which sets trade policies between all European Union states and the rest of the world.
"One of the points I always make to the Israelis is that I represent the government, and the government opposed the bill in January and it opposed it today", Kelly told The Jerusalem Post after the vote.
Perhaps even more importantly, Coveney added, advancing the bill would not only sideline Ireland as a party that both Israelis and Palestinians would take seriously but would also greatly diminish Dublin's ability to influence European Union policy on the Middle East.
Irish Foreign Minister Simon Coveney voiced the government's opposition to the bill during a debate at the Senate.
Currently, the country is importing a variety of products from illegal Israeli settlements, including fruit and vegetables, wine, plastics, big brand beauty products such as "Ahava", and others. "The bill is focused [solely] on the sale of products from settlements and not on trade within the Green Line".
Israel's Foreign Ministry has held the government accountable for the vote and has summoned Kelly to its offices for a Thursday meeting. Spokespeople for Prime Minister Netanyahu, who is also the foreign minister, said at the time that the initiative would "give backing to those who seek to boycott Israel and completely contravenes the guiding principles of free trade and justice".
Saeb Erekat, Palestine Liberation Organization secretary-general, praised the move.
But how did the Irish, who like the Jewish people have also faced centuries of persecution, end up so sympathetic to the Palestinian cause?
She said she visited Palestine earlier this year and, highlighting an Israel settlement which led to a Palestinian village losing its water supply to provide water for a chicken farm.