For Jews, it was the promised land. For Palestinians, it was the 'nakba' - the catastrophe. Everything about Israel, from its founding after the Holocaust in 1948 through conflict, negotiations and the current stalemate, is contested.
When the Jewish state was created, hundreds of thousands of Palestinians were forced to flee to other Arab countries and to the Gaza Strip where they, and their descendants, have remained ever since. Many are stateless, still classified as refugees, not citizens of the countries which hosted them - a gesture by Arab governments to show that they do not accept the existence of Israel. The Palestinians became political pawns.
Israel has grown stronger and bigger, attracting Jewish immigrants from Russia and Ethiopia as well as Europe and the USA. Backed initially by European countries, and later by the USA, it won decisive victories against neighbouring Arab countries in wars in 1967 and 1973. Israel has immense military power, including an undeclared nuclear weapon.
The wars caused further waves of refugees. In 1967, Israel occupied East Jerusalem and the West Bank of the Jordan River which had previously been part of Jordan. Although settling occupied land is illegal under international law, some half a million Jewish settlers now live there, staking a claim to what they regard as historically Jewish territory. Palestinian groups turned to terrorism, the most famous incident being the Black September attack on the Israeli team at the 1972 Olympic Games in Munich.
Years of negotiations, known optimistically as 'the peace process' were held under the rubric of 'land for peace' - the idea being that the Israelis would give land back to the Palestinians, in return for a Palestinian guarantee of peace for the Jewish state. Secret accords, agreed in Oslo in 1993, gave hope to the idea of two states for two peoples. The Palestinian Liberation Organisation or PLO, under the leadership of Yasser Arafat and his Fatah faction, was allowed to return from exile in Tunisia to govern Gaza and part of the West Bank.
Documents leaked to Al Jazeera TV network this year, suggest that while on many occasions Palestinian negotiators were willing to compromise to achieve a Palestinian state, Israel would not budge. Palestinians grew angry with their leaders in Fatah, who had failed to bring peace and who were increasingly corrupt, but two Palestinian uprisings known as 'intifadas' achieved little. In 2005, in Gaza, Palestinians voted in the militant Islamist group Hamas.
Since 9/11 Israel has portrayed this as a struggle between democracy and extremist Islam, but it remains a fight between two peoples over a small piece of land. Across the world, people are passionate supporters of one side or the other, with the US as Israel's most powerful supporter and Arab and Muslim people backing the Palestinians.
Israel has built a wall around its territory, to protect itself from terrorism. On the West Bank, Palestinians are more prosperous than before, but resent growing Israeli settlements on their land. Gaza is effectively a huge prison, where Palestinians depend on aid as there is little employment and Israel restricts imports and exports. The 'peace process' is frozen.
For more detailed information about the history of Palestine and Israel, and links to contemporary news reports, please take a look at our Further Reading section.
Read more from Lindsey Hilsum on the Channel 4 News website.