IntroductionIsraeli Arab industry expanded rapidly between the 1970s and the 1980s. The number of plants grew from a few dozens in the 1950s, to 450 in the early 1980s, to over 900 in the early 1990s (Atrash, 1992; Czamanski and Meir-Brodnitz, 1986;Schnell et al, 1995). About one hundred plants have grown in size, employing dozens of workers and using relatively advanced modes of operation. Most plants, however, have remained small in size, employing up to five workers, using simple technologies and modes of operation. Despite these developments, Israeli Arab industry has remained marginal to the national economy (Haidar, 1993). Moreover, since the mid-1990s, the number of plants operating has decreased because of the closure of many textiles and clothing sewing shops, and the transfer of production to facilities in Jordan and Egypt.The underlying point of view taken in this paper is that there is an uneven pattern of industrial development in Israel, created, preserved, and supported by forces at the national levelöessentially by the government, large corporations, and owners of industrial capital. Based on that assumption, the main argument here is that the historical stages of the industrialization process of Israeli Arab settlements have been