Colonial regimes utilize an arsenal of tried and tested policies to pursue their goals of disownment, exploitation and segregation. Colonial legal systems often fragment the native society and hamper its ability to coalesce around a popular anti-colonial movement. At other instances, colonial regimes subdue native society using secret police and blunt military force which in turn monitor, threaten and physically harm the natives. Nevertheless, colonialism is never a project divorced of material constraints and colonial governments are never omnipotent and frequently tenuous. Historians of colonized countries often stress a varying degree of agency that the colonized apply when struggling to mitigate their difficult political and material conditions. The core of my argument is that the margin of agency that Palestinians possessed under the colonial system of the Israeli Military Government (MG) between the years 1948-1966, was in fact an integral part of the very apparatus that controlled them. Academic studies, memoirs, and novels concerning this time period present the MG as a lot of “nine to five” military clerks, who were supplemented by military units, but could still not be at all places and at all times. Under these conditions the Israeli State was certainly not capable of effectively pursuing some of its declared and undeclared objectives such as the levying of taxes, prevention of subversion and the limitation of Palestinian movement within and beyond Israeli borders. To be sure, life under military rule meant being subject to an authoritative and arbitrary regime yet not an all powerful one. Drawing upon archival documents, oral interviews, and the Arabic and Hebrew language press, I point to a high level of awareness among Jewish society concerning its inability to coerce the native and refugee population to do its bidding. I propose that the smuggling of people and merchandise, the unauthorized movement between quarantined districts, the tilling of sequestered land, tax evasion, non-cooperation, and political subversion - all contributed to the formation the ‘arvi yisraeli, or the Israeli Arab, as a lawless, unruly, tribal and primitive subject who could be governed only through authoritative methods. The paper then proposes to situate the behavior of Palestinian citizens of Israel across a spectrum that is not appreciated though the binary model of collaboration and resistance. Finally, I will claim that the Palestinian citizens of Israel, in some form or another, came to internalize this subjectivity created through the colonial nexus, thus suggesting its efficacy.