Read the whole thing including the links, but here are large excerpts:
At the end of the Six Day War Israel controlled wide tracts of territory, and someone had to decide what to do with them. Israel's Cabinet first discussed the question at length on June 18-19th, a week after the war. The minsters decided the Sinai and Golan would be returned to Egypt and Syria for peace. Jerusalem would not be re-divided. The deliberations about the West Bank were not concluded.
The immediate context: There were intense post-war diplomatic maneuvers going on at the United Nations. Abba Eban, Israel's Foreign Minister, needed orders. The deliberations in Jerusalem were not intended as a fundamental policy statement, but rather as a hurried set of directives to Eban. Many of the ministers feared that showing cards or appearing conciliatory would harm Israel's ability to negotiate. Although their deliberations were classified as Top Secret, any number of times they stopped short and refused to say how far they might be willing to go, for fear their positions might leak. (They seem mostly not to have, which is what makes the document so interesting).
The broader context: The ministers had spent the previous five weeks under intense pressure, frantic preparations for war, even more frantic attempts to stave it off by diplomatic means, and – crucial for understanding the present document – the collapse of the internationally sanctioned framework for Israeli-Egyptian co-existence put in place in 1956 when Israel had been forced hurriedly out of the Sinai. Then there had been the week of war itself. Rather than suffering destruction Israel had won an astonishing victory. Yet the ministers seem to have expected the great powers to re-apply the pressure of 1956. The BBC, as they repeatedly mentioned, had already begun to report about harsh Israeli measures in Jerusalem's Old City, and they expected growing international impatience. Most of them thought Israel's forces would be back behind the previous lines within two months.
Ideologically they were a diverse bunch: this was a National Unity government, with representatives from four socialist parties, two liberal ones, one orthodox party and a nationalist one. They were all Zionists. They were all men. (Golda Meir, their next leader, was not in the government). None were young: Moshe Dayan, at 52, and Yigal Allon at 49 were the only ones not born before WW1. Some had been adults before that war, and all were adults before WW2. All had lived their lives in a world where wars changed borders and moved populations. None had ever met an NGO – the very concept lay decades in the future – and they had no trust in the United Nations even as they recognized it as an important international forum.
Yet while their perspective was different than ours, the positions they staked were mostly cool-headed – the parts they agreed on, and the parts they didn't. They all hoped there would be no more wars. They intended the new conditions to be leveraged into a stable and just coexistence with the Arab world. They assumed the fate of the Arab refugees from 1948 was the irritant that was motivating the conflict and that it could now be resolved.
They implicitly accepted that land could not permanently be taken from sovereign nations by act of war. So they all accepted that the Egyptian Sinai and Syrian Golan would eventually be returned to their owners. Syrian-born Eliyahu Sasson, one of only two non-Ashkenazi ministers and the only one who explicitly grounded his position in a life-long acquaintance with Arab culture, insisted that since no Arab government would make peace with Israel, the Golan and Sinai should be returned for something less than full diplomatic peace. Stringent demilitarization and freedom of Israeli shipping should be enough. Most of his colleagues didn't want to be so pessimistic, but interestingly, Menachem Begin agreed. When in 1978 he agreed to evacuate Israeli forces from the entire Sinai, pundits the world over hailed his flexibility and willingness to change course. Well: read the transcript and you'll see that Begin actually got more in 1978 than he had expected in 1967. In 1967 he was willing to evacuate the Sinai for less than full diplomatic recognition and peace.
In the event, the resolution at the end of the meeting was that both areas would be held until peace was agreed. The West Bank and Gaza were another matter, however.
Sometime in the 1980s the general perception of the conflict changed. No longer seen as Arab rejection of a Jewish State, the conflict was understood as a conflict between Israel and the Palestinians, which the Arab world would maintain only until the two central protagonists reached an accommodation. Since the Israelis and Palestinians have not yet reached accommodation this proposition has never been tested, a fact which contributes to its explanatory power. 1967, however, was before the 1980s, and participants and observers the world over saw the conflict as an Arab-Jewish conflict, with the local Arabs playing a subordinate role; they were not generally referred to as Palestinians.
I know this is hard to believe, but it's true.
This dissonance of historical perspectives is essential to understanding the discussion about the future of the territories. Israel's entire Cabinet in 1967 agreed that Egypt and Jordan had no more claim to Gaza and the West Bank than Israel did, as all three had conquered them through war; since Israel was now in possession it had superior claim. There were serious disagreements, however, as to what that meant.
...Jerusalem: everyone in the room agreed Jerusalem must remain united in Israeli hands, even if this meant Hussein would refuse to reach an agreement which would take the Arab population off Israel's hands in return for some sort of peace. The lines of the city had not yet been drawn, and the official decision would be taken later that month, but those were (important) technicalities. Left to right, atheists to believers, no-one had any doubts. If there was any apprehension regarding Jerusalem, it was that the Christian world would refuse to countenance Jewish control of the city and would relaunch the demand for internationalizing the city.