Abstract. The Palestinian issue remains one of the most persistent and intractable contemporary conflicts. While it retains its special importance for regional players, new conflicts and challenges, along with the changing regional balance of power, have gradually pushed the Palestinian issue into the background on the common Arab agenda. Under these circumstances, the problem has been undergoing transformation, with controversial implications. On the one hand, the struggle of Palestinians for their political rights and for improving their socio-economic conditions comes to the forefront of the Palestinian internal political agenda. There are emerging trends of horizontal social mobilization while the legitimacy of the Palestinian leadership is declining. On the other hand, the absence of positive developments contributes to the increased potential for radicalization and enhances probability of new military clashes.