Remarks on social media from ambassador Ahmad Sadeghi on Saturday called for a "wiping out" of Israelis in Palestine by 2027, while also referring to Israelis as a "Zionist plague".
Senator Wong criticised the remarks, saying they were inconsistent with national values.
"Those comments are inflammatory and they're repugnant, and they do not represent Australia," she said.
"We maintain a diplomatic relationship with Iran because we seek to further Australia's interests; that is why we continue to engage, including in relation ... to the importance of de-escalation, given the circumstances we face in the Middle East."
Officials from the Department of Foreign Affairs and Trade have held talks with Mr Sadeghi following the social media comments.
But opposition home affairs spokesman James Paterson called for the federal government to take further action against the ambassador.
"If he wasn't an ambassador, it's highly likely (the comments) would fall afoul of Australia's anti-incitement and racial vilification laws," he told ABC Radio on Tuesday
"If he is wantonly breaking the law like that and inciting violence against the community ... it is incumbent on the government to take action.
"They have options available to them under the Vienna Convention, including declaring an ambassador to be persona non grata."
The comments come as tensions grow in the Middle East following the death of Hamas' political leader Ismail Haniyeh in Iran.
Iran has vowed retaliation against Israel following the incident, prompting warnings of the Middle Eastern conflict spreading to nearby nations.
Australians in Lebanon have been urged to leave the country as soon as possible.
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