Israel occupied the West Bank, Gaza Strip, Golan Heights, and East Jerusalem during the 1967 War. Following the Madrid peace conference in 1992, Israel and the Palestinians entered into negotiations and in 1993, signed the Oslo Accords which established a framework for negotiating transitional and final status arrangements. Pursuant to the May 1994 Gaza-Jericho Agreement and the September 1995 Interim Agreement, Israel transferred most responsibilities for civil government in the Gaza Strip and parts of the West Bank to the newly created Palestinian Authority (PA). Israel retained responsibility for external security; foreign relations; the overall security of Israelis, including public order in the Israeli settlements; and certain other matters. (This annex on the occupied territories should be read in conjunction with the report on Israel).

The 1995 Interim Agreement divided the territories into Areas A, B, and C, denoting differing levels of Palestinian and Israeli control. Israel was assigned control of certain civil functions and was responsible for all security in portions of the occupied territories categorized as Area C. Israel and the PA were assigned varying degrees of control and jurisdiction over the Gaza Strip and the West Bank. Since then, Israel and the PA have administered the West Bank and Gaza Strip to varying extents. However, the distinctions made under the Interim Agreements were no longer in force following Israel's military incursions into most PA-controlled areas, which Israel carried out citing the Authority's failure to abide by its security responsibilities.

The "Intifada," or Palestinian uprising, began in September 2000. Its causes are complex and remain highly controversial between the parties. Since 2000 the security situation has deteriorated both within Israel and within the Occupied Territories. Israeli and Palestinian violence associated with the Intifada has claimed 1,782 Palestinian lives, 649 Israeli lives, and the lives of 41 foreign nationals. During the past year, the scale and nature of the violence changed and clashes have continued daily. The conflict was marked by increased Israeli military operations and armed attacks and terrorism by Palestinians against Israeli targets--including civilians within Israel, settlers, and soldiers in the occupied territories and Israel. The attacks also included suicide bombings, roadside bombings, shooting at Israeli vehicles and military installations, firing of antitank missiles and mortars, and use of hand grenades. Israel Defense Forces (IDF) military actions against Palestinians included violence and abuse at checkpoints, incursions into Palestinian-controlled towns and villages, targeted killings, firing toward civilian areas with tanks and fighter aircraft, and intense gun battles with Palestinian shooters. Many observers characterized such actions as punitive. By year's end, Israel reasserted military control, which placed all major West Bank cities except Jericho under IDF control, demolished the homes of suicide bombers and wanted men, conducted mass arrests, and transferred some suspects.