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Israel is Israel and Palestine is Palestine. Confusion occurs because both things refer to an extant piece of land with people living on it, a nationality, an ethnicity, and a prior piece of land which no longer exists.

Israel is a Jewish State that contains territory from the former British Mandate of Palestine. The remainder of the British Mandate of Palestine belongs to the modern Palestinian State. Israel is a majority Jewish population who returned from their Exile in Europe and the Middle East. Palestinians are a majority Arab population whose families lived in the region for centuries. Palestinians did not simply become Israelis (except for those who did not flee during the Israeli-Arab War of 1948-9) or vice versa.

If the question is asking why Israel exists where Palestine formerly existed, the premise is faulty. Palestine was the name that the British assigned to that piece of land regardless of its history. Prior to the British, the Ottomans administered Palestine as three distinct regions: Vilayet of Beirut (which included Lebanon and northern Israel), the Vilayet of Damascus (which included Syria, Jordan, and southern Israel), and the Mutasaffirat of Jerusalem (which included central Israel and the Palestinian Territories). The name had nothing to do with the previous administration or the indigenous peoples.

As a result, when the Palestinian Jews declared independence, they chose to call their country according to how they see themselves. This is no different than how the British colony of Rhodesia in Africa became independent as Zambia in the north and Zimbabwe in the south. Since the British name was unconnected to the people on that land, the people reasserted their own identity. Since the Palestinian Arabs did not have a unique identity prior to Israeli independence, they continued to use the term Palestinian to describe their experience.

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