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Muslims currently constitute 19.5 percent of the population of Israel.^{[dubious — see talk page]} Israel is home to Islam's third holiest site or shrine after those in Mecca and Medina in Saudi Arabia: The Haram al Sharif (Temple Mount) from which Muslims believe that Muhammad ascended to Heaven.

This belief, not only by Palestinian Muslims, but by all Muslims, raises the religious and spiritual importance to them of the Dome of the Rock and the adjacent Al-Aqsa Mosque. They are therefore particularly sensitive to, with some of the more extremist elements being angered by the fact that the site is currently under the control of the state of Israel, even though Israeli authorities have refrained from ever flying the Israeli flag on the Haram area, which is formally under control of the Islamic Waqf, the Muslim administrative body currently responsible for the area of the Temple Mount. (In the past, there have been a few instances where Israeli Jewish supremacists have attempted to fly the Israeli flag on the Mount, but police has ever since managed to keep them from getting into the area.)

Dome of the Rock on the Temple Mount, Jerusalem.

The majority of muslims currently residing in Israel are Sunni Arabs. From 1516 to 1917, the Sunni Ottoman Turks ruled the areas that now include Israel. Their rulership reinforced and ensured the centrality and importance of Islam as the dominant religion in the region.

The conquest of Palestine by the British in 1917 and the subsequent Balfour Declaration opened the gates for the arrival of large numbers of Jews in Palestine who began to tip the scales in favor of Judaism with the passing of each decade.

However, the British transferred the symbolic Islamic governance of the land to the Hashemites based in Jordan, and not to the House of Saud. The Hashemites thus became the official guardians of the Islamic holy places of Jerusalem and the areas around it, particularly strong when Jordan controlled the West Bank (1948-1967).

The Bedouin in Israel are also Muslims, with some Bedouin clans participating in the Israeli army.

The small Circassian community is composed of Sunni Muslims uprooted from the Caucasus in the late 19th Century and settled in the Galilee by Ottoman authorities.

In 1922 the British had created the Supreme Muslim Council in the British Mandate of Palestine and appointed Amin al-Husayni (1895-1974) as the Grand Mufti of Jerusalem. The council was abolished in 1948, but the Grand Mufti continued as one of the most notorious Islamic and Arab leaders of modern times, often inciting Muslims against Jews wherever he went.

Palestinian Muslims are free to teach Islam to their children in their own schools.