Palestinian citizens of Israel today comprise about 20% (1.2 million) of the population. They live primarily in the Galilee (in northern Israel), the Triangle (hugging the green line separating the northern perimeter of the occupied West Bank) and in the Negev desert. Palestinians in Israel do not serve in the military, with the exception of the Druze and some Bedouins.

Pre-1948, there were 950,000 Palestinians living in what is now Israel. Of these, 800,000 fled in 1948, to the West Bank, Gaza and to neighboring Arab countries. Of the 150,000 that stayed, one-quarter are internal refugees, forced from their homes in 1948 but never allowed to return. From 1948 until 1966, Palestinian citizens in Israel were subject to military rule, curtailing their civil liberties and routinely harassing community leaders. Martial law was repealed in 1967, but the Palestinian minority is still far from receiving equal consideration, under the law or otherwise.

Funding levels for Palestinian schools and infrastructure receive far less funding than their Jewish counterparts. This leads to a high-dropout rate (3 times the Jewish rate) and the inability of Palestinian localities to expand naturally as their populations grow. Laws such as the Nationality and Entry into Israel Law disallow Palestinian citizens of Israel from marrying Palestinians living in the West Bank or Gaza. The law does, however, allow Jewish Israelis to marry residents of settlements located in the West Bank or Gaza Strip. Unequal treatment of the Palestinian minority in Israel is widely acknowledged by the government, but has yet to be addressed in a systematic manner.