The bill, passed in an 62-55 vote, was applauded by coalition lawmakers as enshrining in legislation what is commonly accepted by most Israelis and much of the world, that Israel is a Jewish state.
The legislation is known as a basic law, similar to a constitutional amendment, which will form the foundation of Israel’s judicial system.
Prime Minister Benjamin Netanyahu called the vote a “defining moment in the history of Zionism.”
However, Arab-Israelis, civil liberty groups and opposition politicians groups have decried the legislation as subjugating Israel’s democratic character to its Jewish character at the expense of minorities.
“The bill opens the way for practices leading to racial discrimination in all spheres of life towards other minorities,” the Association for Civil Rights in Israel said.
The most controversial clause of the law – a passage that appeared to permit religious or ethnicity-based housing discrimination – was removed to gain widespread support.
Israel lacks a constitution and has long performed a delicate balancing act between its Jewish character and a commitment in the Declaration of Independence to providing “full and equal citizenship” to all citizens.
Around 20 per cent of Israeli citizens are Arab.
Ahmad Tibi, a leading Arab-Israeli lawmaker, called the bill “the demise of the principle of democracy in Israel.” (dpa/NAN)