Israel lies on the Mediterranean coast of southwest Asia, with most people living along the coastal plain. The eastern interior is dry and includes the Dead Sea—the lowest point on the Earth's surface. North are the rugged hills of Galilee, and south lies the Negev, a desert plateau. Israel's population is about 81 percent Jewish; most of the rest is Arab. The Israeli-occupied Palestinian territories have some 3.5 million inhabitants—about 11 percent Jewish, 89 percent Palestinian.

Born in battle after the British left Palestine in 1948, Israel has fought six wars with its Arab neighbors. To secure peace, Israel in 1982 ended its 15-year occupation of the Sinai Peninsula, returning it to Egypt. The intifada, a Palestinian rebellion that began in 1987, took hundreds of lives before peace negotiations resulted in a 1993 accord that granted Palestinian self-rule in the Gaza Strip and the West Bank city of Jericho. The Israeli military withdrew from all West Bank cities by 1997—and also left southern Lebanon in 2000. However, peace talks stalled; a second intifada started in September 2000, and most of the West Bank was reoccupied by 2002. Israel annexed the Golan Heights in 1981 after capturing it in 1967—Syria still claims this territory.

A "final status" agreement, leading to a Palestinian state, has yet to be reached between Israel and the Palestinians. Stumbling blocks include:

Jerusalem – Palestinians want their capital in Jerusalem. Israel claims that Jerusalem is its capital and that its status is not negotiable.

Gaza Strip – In 2004 Israel offered to withdraw its forces and Jewish settlements. Palestinians suspect that Israel will keep land in the West Bank after the Gaza pullout.

West Bank – Responding to suicide bombers, Israel started building a West Bank barrier in 2002. Palestinians complain that Israel is using the wall to grab land inside the Green Line—the boundary between Israel and the West Bank based on the 1949 armistice line.