Israeli politics is dominated by Zionist parties which traditionally fall into three camps, Labor Zionism , Revisionist Zionism and Religious Zionism (although there are several Orthodox religious parties which do not consider themselves Zionist).

From the founding of Israel in 1948 until the election of May 1977 , Israel was ruled by successive coalition governments led by the Labor Alignment (or Mapai prior to 1967 ). From 1967 to 1970, a national unity government included all of Israel's parties except for the two factions of the Communist Party of Israel . After the 1977 election, the Revisionist Zionist Likud bloc, then composed of Herut , the Liberals, and the smaller La'am Party, came to power forming a coalition with the National Religious Party , Agudat Israel , and others.

As head of Likud, Menachem Begin became Prime Minister . He remained Prime Minister through the succeeding election in June 1981, until his resignation in the summer of 1983, when he was succeeded by his Foreign Minister, Yitzhak Shamir . After losing a Knesset vote of confidence early in 1984, Shamir was forced to call for new elections, held in July of that year.

The vote was split among numerous parties and provided no clear winner leaving both Labour and Likud considerably short of a Knesset majority. Neither Labor nor Likud was able to gain enough support from the small parties to form even a narrow coalition. After several weeks of difficult negotiations, they agreed on a broadly based government of national unity. The agreement provided for the rotation of the office of prime minister and the combined office of vice prime minister and foreign minister midway through the government's 50-month term.

During the first 25 months of unity government rule, Labor's Shimon Peres served as prime minister, while Likud's Yitzhak Shamir held the posts of vice prime minister and foreign minister. Peres and Shamir switched positions in October 1986. The November 1988 elections resulted in a similar coalition government. Likud edged Labor out by one seat but was unable to form a coalition with the religious and right-wing parties. Likud and Labor formed another national unity government in January 1989 without providing for rotation. Yitzhak Shamir became Prime Minister, and Shimon Peres became Vice Prime Minister and Finance Minister.

The formation of the Labor-Likud coalition in 1984 resulted in the Mapam party leaving the Labor Alignment to join other members of the Israeli peace camp in forming the left wing Meretz party.

The national unity government fell in March 1990, in a vote of no-confidence precipitated by disagreement over the government's response to U.S. Secretary of State Baker's initiative in the peace process.

Labor Party leader Peres was unable to attract sufficient support among the religious parties to form a government. Yitzhak Shamir then formed a Likud-led coalition government including members from religious and right-wing parties.

Shamir's government took office in June 1990, and held power for 2 years. In the June 1992 national elections, the Labour Party reversed its electoral fortunes, taking 44 seats. Labor Party leader Yitzhak Rabin formed a coalition with Meretz (a group of three centre-left parties) and Shas (an ultra-Orthodox religious party). The coalition included the support of Arab and communist parties. Rabin became Prime Minister in July 1992. Shas subsequently left the coalition, leaving Rabin with a minority government dependent on the votes of Arab and communist parties in the Knesset.

Rabin was assassinated by a right-wing Jewish radical on November 4 , 1995. Peres, then Deputy Prime Minister and Foreign Minister, once again became Prime Minister and immediately proceeded to carry forward the peace policies, as well as the economic liberalization policies, of the Rabin government and to implement Israel's Oslo commitments (including military redeployment in the West Bank and the holding of historic Palestinian elections on January 20 , 1996).

Enjoying broad public support and anxious to secure his own mandate, Peres called for early elections after just 3 months in office. (They would have otherwise been held by the end of October 1996.) In late February and early March, a series of suicide bombing attacks by Palestinian terrorists took some 60 Israeli lives, seriously eroding public support for Peres and raising concerns about the peace process. Increased fighting in southern Lebanon, which also brought Katyusha rocket attacks against northern Israel, also raised tensions and weakened the government politically just a month before the May 29 elections. This was further exacerbated by the fact that despite the sharp increase in economic growth rates (brought about by immigration and the peace process), Labour's economic liberalization policies only further increased social and economic gaps.

In those elections - the first direct election of a prime minister in Israeli history - Likud leader Benjamin Netanyahu won by a narrow margin, having sharply criticized the government's peace policies for failing to protect Israeli security. Netanyahu subsequently formed a predominantly right-wing coalition government publicly committed to pursuing the peace process, but with an emphasis on security first and reciprocity. His coalition included the Likud party, allied with the Tsomet and Gesher parties in a single list; three religious parties (Shas, the National Religious Party (Mafdal), and the United Torah Judaism bloc); and two centrist parties, The Third Way and Yisrael b'Aliyah . The latter is the first significant party formed expressly to represent the interests of Israel's new immigrants. The Gesher party withdrew from the coalition in January 1998 upon the resignation of its leader, David Levy , from the position of Foreign Minister.