Abstract: The authors argue in this paper that a conspicuous and as of yet unachievable Israeli-Palestinian peace deal, while serving the interests of most Israelis and most Palestinians, creates profound conflicts within each community. These conflicts help explain why the Oslo Principles were so vague, why there has been a pattern within both communities of deferring decisions on these issues, and why, although there is substantial evidence that moderates on both sides might be able to make this deal, it has never been accomplished.