Two years after Harvard rejected calls to divest University funds from Israeli holdings, an activist group in nearby Somerville is reviving the debate.

A resolution drafted by Somerville Divestment Project, a volunteer group formed in early 2003, urged the city to divest its retirement fund from an Israeli bond worth $250,000 and withdraw investments in companies holding defense contracts with the Israeli army.

The proposal failed to receive a recommendation from Somerville’s Legislative Matters Committee last night, and will likely be voted down tomorrow by the full Board of Aldermen in favor of an alternate proposal.

But the issue has provoked a citywide outcry that may not abate soon.

“Many people don’t understand what our money is doing there to begin with, in foreign bonds that are linked to human rights violations,” said Ron Francis, an organizer for Somerville Divestment Project. The group presented a petition with over 1,100 signatures in favor of divestment to the board last month.

But Somerville’s mayor said earlier this month he would veto a divestment resolution if passed by the board, and the chairman of the retirement fund has said that the resolution would have no real impact on the fund’s investments.

“Our vote tonight really is a symbolic one,” said William A. White ’77, a Somerville alderman. “The type of proposal we have before us tonight would not accomplish anything in the long run.”

Somerville’s pension fund has shares in United Technologies, Caterpillar, Boeing and other corporations that provide Israel with defense equipment.

Supporters for both sides packed City Hall last night, wielding signs proclaiming “Human Rights For All People” and “Pro-Peace, Pro-Divestment.” Hisses, applause and interjections from the crowd consistently interrupted the board’s proceedings.

Proponents of the divestment plan remained optimistic.

“We knew this would be a hard way to go. But we’re not going anywhere. We’re fighting this fight until we’re successful,” said Somerville Divestment Project spokesman Elisha Harig-Blaine.

“The failure to confront racism and apartheid is demoralizing a little bit,” said Kareem Talhouni, a Cambridge resident sporting a “Free Palestine” pin on his shirt. “But South Africa was freed from apartheid. David did beat Goliath in the end.”

While Harvard’s divestment petition ultimately failed, professors and students remain split on the issue.

“The Arab boycott against Israel has been going on for decades and it is simply disgusting that Americans should join the boycott,” said Peretz Professor of Yiddish Literature Ruth R. Wisse, an opponent of divestment. “Many people want to hold Israel responsible for the aggression against it.”

Edgar Pierce Professor of Psychology Ken Nakayama, a signer of the 2002 petition, argued that divestment may be more feasible in the public sphere.