This came after India took up the matter with the Palestinian authorities.
"Palestine has conveyed has conveyed deep regrets over the incident and assured the Government of India that they are taking serious cognizance of their ambassador's presence at this event," said the Ministry of External Affairs (MEA) in a statement on Saturday.
"Government of India has strongly conveyed to the Palestinian side that the Palestinian Ambassador in Pakistan's association with terrorist Hafiz Saeed, who is proscribed by the United Nations, at an event in Rawalpindi on 29.12.2017, is unacceptable," the statement added.
The MEA conveyed the concerns to Palestinian Ambassador in India as well as to the Minister of Foreign Affairs and Expatriates in Ramallah.
"It was also conveyed that Palestine highly values its relationship with India and stands with us in the war against terrorism, and will not engage with those who commit acts of terror against India," the statement said.
"We take note of the assurances given by the Palestine side," it added.
Yesterday, India reacted sharply after the picture of Palestinian Ambassador to Pakistan attending a rally organised by JuD chief and mastermind of Mumbai terror attack Hafiz Saeed surfaced on the social media platforms.
Saeed is designated as a global terrorist by the UN and is accused as the mastermind of the Mumbai 26/11 attacks that claimed 166 lives.
The global terrorist carries a bounty of 10 million USD (approx. Rs 66 crore) and continues to exercise a lot of influence in religious circles.
He has recently been released from house arrest after a Pakistani court cited lack of evidence against him in Mumbai attack case.