In January 1993, Israeli and Palestine Liberation Organization (PLO) negotiators began secret negotiations in Oslo, Norway. On September 9, 1993, Yasser Arafat sent a letter to Israeli Prime Minister Yitzhak Rabin, stating that the PLO officially recognized Israel's right to exist and officially renouncing terrorism. On September 13, Arafat and Rabin signed a Declaration of Principles in Washington, D.C., on the basis of the negotiations between Israeli and Palestinian teams in Oslo, Norway. The declaration was a major conceptual breakthrough achieved outside of the Madrid framework which specifically barred foreign-residing PLO leaders from the negotiation process. After this, a long process of negotiation known as the "Oslo peace process" began.
During the Oslo peace process throughout the 1990s, as both sides obligated to work towards a two-state solution, Israel and the Palestine Liberation Organization negotiated, unsuccessfully, and tried to reach to a mutual agreement.
One of the main features of the Oslo Peace Process was the establishment of the autonomous governmental authority, the Palestinian Authority (PA) and its associated governing institutions to administer Palestinian communities in the Gaza Strip and the West Bank. During the Oslo peace process throughout the 1990s, the Palestinian Authority was ceded authority from Israel over various regions of the West Bank and Gaza Strip. This process gave it governmental and economic authority over many Palestinian communities. It also gave the PA many of the components of a modern government and society, including a Palestinian police force, legislature, and other institutions. In return for these concessions, the Palestinian Authority was asked to promote tolerance for Israel within Palestinian society, and acceptance of Israel's right to exist.
One of the most contentious issues surrounding this peace process is whether the PA in fact met its obligations to promote tolerance. There is specific evidence that the PA actively funded and supported many terrorist activities and groups. Palestinians stated that any terrorist acts stemmed from Israel not having conceded enough land and political power to win support among ordinary Palestinians. Israelis stated that these acts of terrorism were because the PA openly encouraged and supported incitement against Israel, and terrorism. There was increasing disagreement and debate among Israelis about the amount of positive results and benefits produced by the Oslo process. Supporters said it was producing advances leading to a viable Palestinian society which would promote genuine acceptance of Israel. Opponents said that concessions were merely emboldening extremist elements to commit more violence in order to win further concessions, without providing any real acceptance, benefits, goodwill, or reconciliation for Israel in return.
In February 1994 during the Cave of the Patriarchs massacre a follower of the Kach movement killed 25 Palestinian-Arabs at the Cave of the Patriarchs in Hebron. As an act of revenge to the Cave of the Patriarchs massacre, in April 1994, Hamas launched suicide bomber attacks targeting Israeli civilian population in many locations throughout Israel, however, once the Hamas started to the use these means it became a regular pattern of action against Israel.

In September 28, 1995, Prime Minister Yitzhak Rabin and PLO Chairman Yasser Arafat signed the Israeli-Palestinian Interim Agreement on the West Bank and the Gaza Strip in Washington. the agreement marked the conclusion of the first stage of negotiations between Israel and the PLO. The agreement allowed the PLO leadership to relocate to the occupied territories and granted autonomy to the Palestinians with talks to follow regarding final status. In return the Palestinians recognized Israel's right to exist and promised to abstain from use of terror. However the agreement was opposed by the Hamas and other Palestinian factions whom at this point were already committing suicide bomber attacks throughout Israel.
Tensions in Israel, arising from the continuation of terrorism and anger at loss of territory, led to the assassination of Prime Minister Rabin by a right-wing Jewish radical on November 4, 1995. Upon Rabin's assassination, the Israeli prime minister's post was filled by Shimon Peres. Peres continued Rabin's policies in supporting the peace process.
In 1996, increasing Israeli doubts about the peace process, led to Benjamin Netanyahu of the Likud Party winning the election, mainly due to his promise to use a more rigid line in the negotiations with the Palestinian Authority. Netanyahu raised many questions about many central premises of the Oslo process. One of his main points was disagreement with the Oslo premise that the negotiations should proceed in stages, meaning that concessions should be made to Palestinians before any resolution was reached on major issues, such as the status of Jerusalem, and the amending of the Palestinian National Charter. Oslo supporters had claimed that the multi-stage approach would build goodwill among Palestinians and would propel them to seek reconciliation when these major issues were raised in later stages. Netanyahu said that these concessions only gave encouragement to extremist elements, without receiving any tangible gestures in return. He called for tangible gestures of Palestinian goodwill in return for Israeli concessions.
In January 1996 Israel assassinated the chief bombmaker of Hamas, Yahya Ayyash. In reaction to this, Hamas carried out a wave of suicide attacks in Israel. Following these attacks the Palestinian Authority began to act against the Hamas and oppress their activity.
In January 1997 Netanyahu signed the Hebron Protocol with the Palestinian Authority, resulting in the redeployment of Israeli forces in Hebron and the turnover of civilian authority in much of the area to the Palestinian Authority.
In 1997, after two deadly suicide attacks in Jerusalem by the Hamas, Israeli secret agents were sent to Jordan to eliminate the political head of the Department of Hamas, Khaled Mashal, using a special poison (See the assassination attempt on Khaled Mashal). Nevertheless, the operation entangled and the secret agents were captured. In return of their release Israel sent over the medicine which saved his life and freed a dozen of Palestinian prisoners including Sheikh Ahmad Yassin. This release and the increase of the security forces of the Palestinian Authority, led to a cease-fire in the suicide attacks until the outbreak of the Second Intifada.
Eventually, the lack of progress of the peace process led to new negotiations which produced the Wye River Memorandum which detailed the steps to be taken by the Israeli government and Palestinian Authority to implement the earlier Interim Agreement of 1995. It was signed by Israeli Prime Minister Benjamin Netanyahu and PLO Chairman Yasser Arafat, and on November 17, 1998, Israel's 120 member parliament, the Knesset, approved the Wye River Memorandum by a vote of 75-19.


In 1999, Ehud Barak was elected prime minister. Barak continued Rabin's policies in supporting the peace process. In 2000, 18 years after Israel occupied Southern Lebanon in the 1982 Lebanon War, the occupation ended as Israel unilaterally withdrew its remaining forces from the "security zone" in southern Lebanon.
As the violence increased with little hope for diplomacy, in July 2000 the Camp David 2000 Summit was held which was aimed at reaching a "final status" agreement. The summit collapsed after Yasser Arafat would not accept a proposal drafted by American and Israeli negotiators. Barak was prepared to offer the entire Gaza Strip, a Palestinian capital in a part of East Jerusalem, 73% of the West Bank (excluding eastern Jerusalem) raising to 90-94% after 10–25 years, and financial reparations for Palestinian refugees for peace. Arafat turned down the offer without making a counter-offer.