Speaking in Athens, Moshe Yaalon said IS had "enjoyed Turkish money for oil for a very, very long period of time".
Turkey denies permitting IS smuggling, and the US recently rejected Russian allegations that Turkish government officials were in league the militants.
IS has captured swathes of Syria and Iraq, including operational oil fields.
"It's up to Turkey, the Turkish government, the Turkish leadership, to decide whether they want to be part of any kind of cooperation to fight terrorism," Mr Yaalon told reporters after a meeting with his Greek counterpart.
"This is not the case so far. As you know, Daesh [Islamic State] enjoyed Turkish money for oil for a very, very long period of time. I hope that it will be ended." Read more on bbc.