Terrorism continued to have a major impact in Israel and the occupied territories in 1996. Palestinian extremists opposed to peace with Israel conducted four massive suicide bombings in Tel Aviv and Jerusalem early in the year, which killed 65 civilians. The overall number of anti-Israeli terrorist attacks instigated by Palestinians declined to 14 in 1996 from 33 in 1995.

On 25 February a suicide bomber blew up a commuter bus in Jerusalem, killing 26, including three US citizens, and injuring 80 others, including another three US citizens. The Islamic Resistance Movement (HAMAS) claimed responsibility for the bombing. (HAMAS also claimed responsibility for a second bombing on the same day in Ashqelon, killing two persons, in an act of domestic terrorism.) On 3 March a suicide bomber detonated a bomb on a bus in Jerusalem, killing 19 and injuring six others. This bomb was wrapped with ball bearings and other metal fragments to increase casualties. A HAMAS spokesman claimed responsibility and said the attack was in response to Israel's rejection of a conditional cease-fire offered by HAMAS. On 4 March a suicide bomber detonated a bomb outside the Dizengoff Center, Tel Aviv's largest shopping mall, killing 20 and wounding 75 others, including two US citizens and children celebrating the Jewish Purim holiday. HAMAS and the PIJ both claimed responsibility for this bombing.

HAMAS suicide bombing in Jerusalem on 25 February left 25 dead and 80 injured.

Other Palestinian groups that reject the peace process also launched anti-Israeli attacks in 1996, including the Popular Front for the Liberation of Palestine (PFLP) and Abu Musa's Fatah-Intifada. Unidentified gunmen, presumably Palestinian rejectionists, conducted another cross-border attack from Lebanon in March, killing 2 soldiers and wounding 9 others. On 11 December gunmen from the PFLP attacked a car carrying Israeli settlers near the settlement of Bet El north of Ram Allah in the West Bank, killing a woman and her 12-year-old son. The PFLP claimed responsibility and threatened other attacks on settlers. Palestinian Authority (PA) courts later convicted three PFLP members for the attack.

Israeli extremists also committed terrorist acts in 1996. On 4 February an unidentified Israeli reportedly fired on a group of Palestinian students on the main Nabulus-Ram Allah road, wounding a 16-year-old boy. On 1 October a Palestinian man died after being shot near Bet Shemesh. On 21 October an Israeli reportedly shot and killed a Palestinian man near the West Bank village of Sinjil.

The United States and Israel increased cooperation against terrorism in 1996. In April President Clinton and then Prime Minister Peres agreed to form the US-Israel Joint Counterterrorism Group, which held its first meeting in Washington in November. In response to the President's request, the US Congress voted to give Israel a grant of $100 million for the purchase of equipment to fight terrorism.

The Palestinian Authority, which is responsible for security in the Gaza Strip and most West Bank towns, continued in 1996 its effort to rein in Palestinian violence aimed at undermining the peace process. The PA security apparatus prevented several planned terrorist attacks and arrested Palestinians suspected of involvement in terrorist operations, including one who admitted his involvement in the murder of a dual US-Israeli citizen on 13 May. Chairman Arafat and other senior PA officials regularly condemned acts of terrorism.