Bernardo Silva grabbed the winner four minutes from time in Petah Tikva to clinch a seven-goal thriller for Rui Jorge's side and send them top of Group 8.
Ivan Cavaleiro and Ricardo struck for the visitors after Munas Dabbur and Dia Seba had twice put the hosts ahead before Silva edged Portugal ahead for the first time just after the hour mark. Taleb Twatha had appeared to have sealed a point for Israel but Silva struck again to maintain his team's 100% record in 2015 UEFA European Under-21 Championship qualifying.
The home side forged ahead on nine minutes as Dabbur lashed home following an incisive break into the area from Gizacho Gadi Kinda, but Cavaleiro brought things level seven minutes later as the forward brought down Luís Gustavo's long ball before slotting past Barak Levi. Seba struck the woodwork after the break, Dabbur collecting the rebound and playing in the substitute who did not miss a second time.
Ricardo's close-range finish made it 2-2 and Portugal went ahead for the first time when Silva struck in the 64th minute. Twatha's header from Eliazer Dasa's cross squared things up again, but Cavaleiro played in Silva to score a late deflected effort which stole the points.