England are now two points ahead of Russia and need a draw against Croatia in their final qualifier on Wednesday to secure a Euro 2008 place.
Israel took the lead through Elyaniv Barda before Diniyar Bilyaletdinov levelled as Russia started to dominate.
Russia hit the post late on before Omer Golan netted a winner for Israel.
The goal would have been the cue for celebrations from England boss Steve McClaren and his players who were relying on Israel to do them a favour.