Palestinian Arab citizens of Israel; those Palestinians (and their descendants) who stayed in their homes during the Arab-Israel War (1948) or who returned and were allowed to stay. About 750,000 Palestinians became refugees in 1948; while about 150,000 stayed within the Israeli borders. Some fled and managed to return afterward, although all but 20,000–30,000 were expelled again. In late 1948 the Palestinians in Israel were 156,000, about 18 percent of the Israeli population; in 2004 they number more than 1.3 million (including the annexed areas of East Jerusalem and its suburbs), or about 20 percent of the population of Israel. Most are Sunni Muslim; almost 18 percent are Christians, and approximately 10 percent are Druze (and some unclassified). Until 1966 they were forbidden to travel without a special permit. Except for the Druze, Palestinian Israelis are exempt from military service. Otherwise they enjoy, theoretically, the same rights as other Israelis. Nevertheless, for many years, Palestinian Israelis have been treated as second-class citizens, discriminated against in education (Arabs are schooled in a separate, and less well-funded, system), housing (the government has granted only 1,000 permits to build new housing for Arabs since 1948), employment (unemployment among Palestinian Israeli men is estimated to be over 14 percent), and social provisions.
Between 1960 and 1980, the Palestinian Israeli population—whose land had been taken from them and thus had become mostly urban residents—reinforced a Palestinian nationalist feeling by voting for leftist Israeli parties (the largest, MAPAM and Labor, ran candidates on separate "Arab lists" into the 1970s). By the middle of the 1980s, after having long been rejected by both Israelis and Palestinians in the Occupied Territories, the Palestinian Israelis had started to feel more comfortable with their double nationality. They founded their own parties and started participating more actively in Israeli political life; this time also saw the rise of the Israeli Islamic Movement (IIM). At the time of the 1992 elections, Palestinian Israelis were the focus of much political maneuvering that aimed at persuading them to rally to the ranks of the two main Israeli political parties, Likud and Labor. After the ballot of 30 May 1996 that won them eleven seats in the Knesset for different Arab and mixed Arab and Jewish parties, the Palestinian Israelis became much more assertive about their rights. The Arab Democratic Party, specifically Palestinian, won four seats, while the other representatives belonged to the Democratic Front for Peace and Equality, the Labor Party, and Meretz. In March 1999, anticipating the general elections of the following May, Azmi Bishara, Democratic Front for Peace and Equality representative and founder of the National Democratic Alliance (NDA), announced his candidacy for the post of prime minister, becoming the first Arab to run for this office. Just before the vote he withdrew his candidacy and threw his support to the Labor candidate, Ehud Barak. On 18 May 1999, after the election, Palestinian Israelis had won a total of thirteen seats, divided between the Democratic Front for Peace and Equality, the NDA, the Unified Arab List, Meretz, and Israel United. Among these new representatives was Hussniya Jabara, the first Palestinian woman ever elected to the Knesset.
Between 1998 and 1999 two events evidenced the integration of the Arab community into Israel: the appointment of an Arab judge, Abdel Rahman Zoabi, to the High Court of Justice, and Rana Raslan's winning the title of Miss Israel. In 2000 Palestinian Israelis were represented in the Knesset by 13 seats that represented several parties: 5 for the Unified Arab Party, 2 for the Democratic Front for Peace and Equality, 1 for the National Democratic Assembly, 1 for the Arab Movement for Change, 2 for the Labor Party, 1 for Meretz, and 1 for Likud. Among them, Nawaf Masalha was deputy minister of foreign affairs and Salih Tarif, a Druze, chairman of the Rules Committee of the Knesset. In January 2001, the Arab community of Israel decided to boycott the elections of the following 6 February in protest against the policies of the Labor government of Ehud Barak. Labor went on to lose power, partly perhaps because of the drop in Arab support.
During the summer of 2001, when the Likud was back in power in a national unity government (in which Tarif was a minister without portfolio) and the al-Aqsa Intifada was intensifying in the Palestinian territories, two Palestinian Israeli deputies were the focus of an Knesset investigation. In November 2000, Azmi Bishara had gone to Damascus, where he met President Bashar al-Asad. One result of this visit was the organization of a trip that allowed Palestinian Israeli families to see their relatives who were refugees in Syria. In June 2001, the Knesset opened an inquiry about him, following remarks he had made that were thought to be anti-Israeli on the occasion of Hafiz al-Asad's death. Two months later the same charges were leveled against another Palestinian Israeli representative in the Knesset, Taleb al-Sanaa. On 7 November 2001 the Knesset lifted Bishara's parliamentary immunity, accusing him of incitement to terrorism and of organizing travel to a country at war with Israel. In 2002 Bishara and Ahmad Tibi were barred from running in the next election on the grounds that they had supported "terrorists" by denouncing the Israeli assault on Jenin that spring, but the Israeli Supreme Court overturned the ban shortly before the election in January 2003. Both Tibi and Bishara were returned to the Knesset.
Palestinian Israelis generally supported the Oslo Accords of 1993, and they have generally favored the establishment of a Palestinian state in the West Bank and Gaza Strip. But their belief in the good faith of Israeli governments has been decreasing. In October 2000, after the incident at the Haram al-Sharif that set off the al-Aqsa Intifada, Palestinian Israelis demonstrated in solidarity with the Palestinians of the territories. Police opened fire on the demonstrators and killed thirteen. A commission of inquiry was appointed, headed by Supreme Court Justice Theodor Orr, which issued a report in September 2003. The report deplored official neglect of underlying social issues and police overreaction, but also found that police "underreaction" to previous incidents, and "incitement" by Palestinian Israeli politicians such as Bishara, had also been at fault. Its major recommendations, however, were that to "remove the stain of discrimination," Israel must provide a more equitable system, specifically in the areas of land and housing allocation, education, state ministry budgeting, and employment. The government agreed to the recommendations (although it has yet to publish the report in Arabic).