In 1947, the U.N. voted to partition the British Mandate of Palestine, in light of its recognition that both Jews and Arabs had legitimate claims to the land. The proposed partition included three areas: a Jewish state, an Arab state, and an internationally administered zone in Jerusalem. The Jewish population accepted, and reaffirmed their intention to coexist peacefully with the Arabs living in the area; the Arab population refused, and responded with riots and violence.
When Israel was established half a year later, its founders officially extended their “hand to all neighbouring states and their peoples in an offer of peace and good neighbourliness, and [appealed] to them to establish bonds of cooperation and mutual help [...] for the advancement of the entire Middle East”. Those countries responded by launching a war of annihilation on the newborn state. Decades later, Palestinian President Mahmoud Abbas acknowledged the Arab refusal to accept the 1947 partition plan as a "mistake".
In 1967, after defending itself against another war of annihilation, the Israeli government accepted UN Resolution 242 and voted unanimously to return the vast majority of territories it had captured (the Sinai Desert, Golan Heights, Gaza Strip and West Bank) in exchange for peace. The Arab response was unequivocal: “no peace with Israel, no recognition of Israel, no negotiations with it”.
In 2000, Israel made a series of two-state proposals which (contrary to popular myth) eventually included almost all of the West Bank (plus additional territory from Israel proper), the entire Gaza strip, Palestinian control over East Jerusalem, and a $30 billion solution for the Palestinian refugees. Palestinian leader Yasser Arafat not only refused – he made no counter-offer, abandoned negotiations, and immediately began planning the Al-Aqsa Intifada. Arafat was heavily criticized for this, both by the American mediators and by fellow Arabs and Palestinians.
Those Arab countries that eventually came to accept Israel’s existence – Egypt (1979, despite widespread Arab opposition) and Jordan (1994) – signed peace treaties which have been mutually honored to this day.
“Since 1948, every time we've had something on the table we say no. Then we say yes. When we say yes, it's not on the table anymore. Then we have to deal with something less. Isn't it about time we say yes?”
- Prince Bandar bin Sultan of Saudi Arabia