The venue's artistic director Indhu Rubasingham had previously refused to host the festival due to the fact it's funded by the Israeli Embassy, insisting she would take the same stance regarding a Palestinian festival.
Her decision met with widespread protests and reportedly led to one of the Tricycle's chief supporters, Sir Trevor Chinn, withdrawing his annual donations.
But now the venue has decided to go ahead with the festival with "no restrictions" on funding from the Israeli Embassy.
A joint statement from the UKJFF and Tricycle Theatre reads:
"Some weeks ago the UKJFF fell out, very publicly, with the Tricycle over a condition imposed by the Tricycle regarding funding. This provoked considerable public upset. Both organisations have come together to end that.
Following lengthy discussions between the Tricycle and UKJFF, the Tricycle has now withdrawn its objection and invited back the UK Jewish Film Festival on the same terms as in previous years with no restrictions on funding from the Embassy of Israel in London.
The UKJFF and the Tricycle have agreed to work together to rebuild their relationship and although the festival is not able to return in 2014, we hope to begin the process of rebuilding trust and confidence with a view to holding events in the future.
We both profoundly hope that those who take differing views on the events of the last few weeks will follow our lead and come together to acknowledge that dialogue, reconciliation and engagement will resolve points of difference and ensure that cultural diversity thrives in all communities."