The Palestinian federation (PFA) first proposed the sanctioning and suspension of the Israeli association back in April, basing it on claims of human rights and humanitarian law violations committed in the Gaza Strip.
The PFA called for a vote to exclude Israel at FIFA Congress, which was supported in the room by the Jordanian FA.
However, FIFA president Gianni Infantino said it was a matter for the FIFA Council to make a decision on, once they had sought an independent legal assessment.
The governing body has now revealed the initial expected timeframe for a decision has been extended, following requests from both parties over their submissions.
A FIFA statement read: "An independent legal assessment of the Palestinian Football Association proposals against the Israel Football Association was due to be provided to FIFA Council by 20 July 2024.
"Following requests for extension from both parties to submit their respective positions, duly granted by FIFA, more time is needed to conclude this process with due care and completeness.
"The assessment will be shared with the FIFA Council for any subsequent decision no later than 31 August 2024.
"FIFA would like to thank both member associations for their ongoing support and co-operation."
The soccer tournament at the Paris Olympics begins with the group stage from July 24, with the men's gold medal match set to take place on August 9.
Israel have been drawn into Group D alongside Japan, Mali and Paraguay, with the top two nations set to advance through to the knockout stage.
