In the mid-19th century Jews from Europe started emigrating to Palestine, settling in small agricultural communities. There was friction from the start between the Jewish newcomers and the local inhabitants, mainly Muslim and Christian Arabs, laying the immediate foundations for conflict later on. Dramatic changes began during WWI when British forces sought partnership from both the Jews and the Arabs of Palestine. Inconsistent and duplicitous dealings were made with both groups but ultimately the British promised to support the Jews in their quest for a homeland in Palestine.

Britain, looking for ways to quit the territory, passed the buck to the newly formed United Nations, which approved a plan to partition the land between Arabs and Jews. The Arabs rejected the plan outright. The Jews publicly accepted the proposal, but there were doubts as to whether they would honour it. As the confrontation mounted, the British left early, Israel declared independence and almost immediately fighting broke out between Arabs and Jews. Egypt, Syria, Jordan and Lebanon invaded Palestine, but were repelled by the Jewish immigrants familiar with modern weaponry and strategy. A year later, a UN-sponsored cease fire ended the fighting, but not before Israeli forces had occupied significant portions of Palestine, including the Galilee region, the coastal plain and the Negev Desert. Egypt moved into Gaza Strip while Transjordan (which would soon become Jordan) held the West Bank and East Jerusalem. Thousands of Arabs fled their homes in the fighting and became refugees in the West Bank, Gaza and neighbouring Arab states. The border between Israel and its new nieghbours was called the 'Green Line' because negotiators drew it on a map in green ink.

Hostilities continued to brew between the Arabs and Jews, a situation exacerbated by restive refugee camps inhabited by thousands of Palestinian Arabs. Resistance groups sprung up and by the 1960s had banded together to form the Palestine Liberation Organization (PLO). Yasser Arafat soon came to the fore as the PLO leader and symbol of the resistance movement. The PLO quickly launched a series of brash acts of sabotage, murder and hijackings.

Meanwhile, Egypt, Jordan, Syria and Lebanon built up their armies all along the Green Line and Israel responded with a major air and ground assault on 5 June, 1967. Six days later, a victorious Israel occupied the Sinai, the Gaza Strip, the West Bank and the Golan Heights. In the wake of the fighting, almost 500,000 Palestinian Arabs left their homes rather than remain under Israeli occupation in the West Bank and Gaza Strip.

Following the war PLO militancy, now firmly based in Jordan, continued to rise and posed a major threat to Jordan's King Hussein. The resulting confrontation culminated in the 1971 massacre of Palestinian refugees, an incident that became known as 'Black September'. A year later the PLO shocked the world when it kidnapped and murdered 11 Israeli athletes at the Olympic Games in Munich.

The PLO was forced to seek refuge in Lebanon, where it created a mini state-within-a-state. There too the PLO presence proved disastrous for the host country, leading to Israel's 1982 invasion and occupation. On the verge of collapse, the PLO decamped to a new base in Tunisia. These setbacks brought about a more conciliatory tone and in 1988 Arafat changed tactics by explicitly recognising Israel and accepting the principle of a two-state solution to the conflict.

Meanwhile Palestinians living in the West Bank and Gaza were facing problems of their own. Israel made some efforts to improve the quality of life in the West Bank and Gaza, but these paled in comparison to the efforts made to develop Israel proper. A huge disparity existed between Arabs living in the occupied territories and those living in Israel. East Jerusalem was annexed by Israel in 1980, but the move was declared illegal by the UN Security Council. Israel's creation of settlements in the West Bank and Gaza, altogether containing more than 250,000 people, were also highly contentious. In response to these problems, riots erupted in Gaza in 1987, with stone-throwing youths attacking IDF soldiers. Soon the riots turned into a full-fledged intifada (uprising) and spread to cities in the West Bank. The fighting continued sporadically until the 1993 signing of the Oslo Peace Accords.

The Oslo Accords set parameters for a two-state solution between Israel and Palestine and formally established the Palestinian National Authority to replace the PLO. Independent Palestine was set to be a reality within five years but irreconcilable differences derailed the peace process. Neither side could come to a conclusion on key issues such as the state of refugees who had fled earlier wars, the status of borders, settlements and Jerusalem. As peace deteriorated, more settlements were built in the West Bank, IDF incursions continued in the territories, and Palestinian suicide attacks in Israel became increasingly common.

A second chance for peace arrived in 2000 but ultimately Arafat rejected an offer negotiated by US president Bill Clinton, setting the stage for further conflict. Tensions rose again in 2001, culminating in a second intifada, which lasted four years and cost more than 3000 Palestinian lives. Israel's response to the second intifada was to begin construction of a concrete barrier to divide the Palestinian territories from Israel. In 2004 the wall was declared illegal by the International Court of Justice.

In parliamentary elections in January 2006 Palestinians voted the militant group Hamas into power. Western powers immediately demanded that Hamas renounce violence and recognise Israel; when it refused, the United States and the European Union stopped the flow of aid to the Palestinian Authority (PA). As of March 2006 the PA was facing a deficit of US$110000000.00 a month and has been unable to pay full salaries to 140,000 government employees. Israel has also cut the transfer of US$55000000.00 in tax receipts to the PA. Tensions between the new Hamas-led government and Fatah security forces have led to sporadic clashes in 2006 and President Mahmnmoud Abbas (Abu Mazen) continues to face the threat of growing violence in the West Bank and Gaza.