The ministers voted unanimously in support of the cessation of moves towards normalisation, the closure of Israeli offices and missions and withdrawal from multilateral Middle East talks.
The resolution, proposed at the second session of a regular six-monthly meeting at Arab League headquarters, follows Israel's decision to go ahead with a Jewish settlement in Arab East Jerusalem, a step which angered Palestinians already unhappy with Benjamin Netanyahu's right-wing government. Under normal procedure, the proposals will now have to go to Arab heads of state.
The final text of the resolution was not immediately available. But asked if the boycott was in the text, the Syrian Foreign Minister, Farouq al- Shara said: "Yes, yes, clearly ... It is clearer and stronger and it has been adopted unanimously."
Syria has long argued that isolating Israel was the best way to deal with Mr Netanyahu. Some Arab states had abandoned the first-degree boycott, which banned direct commercial dealings with Israeli companies, in the last three years.
However, Farouk Kaddoumi, head of the Palestine Liberation Organisation's foreign affairs department, said the ministers had not discussed countries which have signed full peace treaties with Israel - that is Egypt and Jordan. Israel could interpret breaking relations as a violation of those treaties.
He added that they would now aim to get the backing of heads of state and ensure that the resolutions had a political impact on "the intransigent side [Israel]." One Arab official said earlier that unnamed Arab states had reservations about the resolutions but Kaddoumi said this was not the case. "The resolutions were unanimous," he said.
Israel branded the Arab League resolution as absurd. Foreign ministry spokesman Ygal Palmor said: "Normal neighbourly relations and regional cooperation are supposed to be an asset and a common interest for all countries in this region. It is absurd that they are being deemed as a whip, so to speak, to be used against Israel whenever there is a crisis in the peace process."
The government of Mr Netanyahu has angered all Israel's neighbours but the final straw was the decision to go ahead with the Jewish settlement project in Jabal Abu Ghneim, a part of East Jerusalem known to Jews as Har Homa.
Palestinians see Arab East Jerusalem as the capital of a future Palestinian state. The Israelis captured it in 1967, and have been trying to change the demographic balance in favour of the Jewish community.