This paper calls into attention the overlooked question of Palestinian citizens’ incorporation into Israel. Focusing on Nazareth in the first two years after 1948, the paper offers an historical perspective to examine the new reality Palestinians faced within the exclusionary state and their responses to this reality. Nazareth, which survived the displacement that was the fate of the vast majority of Palestinians during 1948, still suffered from severe problems. Beyond the political defeat and the loss of contact with the Arab world, residents of Nazareth faced over-crowdedness as the city housed thousands of refugees from the area, food and water shortages, and high unemployment. The city, along with most Palestinian areas inside Israel, was also put under a strict military regime that controlled all aspects of life. Drawing upon archives in Arabic, Hebrew and English, from Israel, the UK and US, this research presents how Palestinians utilized different strategies to survive not only their larger political situation but also the day-to-day aspects of their lives. I elaborate on Palestinians’ interactions with Israeli officials in response to their new situation, and how it evolved over time: after the initial crisis of shortage of basic provisions, Nazareth representatives advanced claims that aimed at setting the parameters for longer-term relationship with the Israeli authorities, negotiating various degrees of autonomy and exploring the limits of Israeli tolerance. Such an historical perspective reveals that Palestinians responded in a variety of ways to their incorporation into the Israeli state, from enthusiastic cooperation to forceful resistance and even confrontation. In examining these strategies of survival, this paper highlights the political imagination of historical actors. Rather than accepting the popular but simplistic collaboration/resistance dichotomy, I argue for a nuanced approach that takes into consideration what was within the range of possibility at that historical moment in such a peculiarly constrained colonial transition. This paper thus argues that Nazareth’s history at this juncture echoes the experience of a national minority confronting a new, settler-colonial nation-state. In such cases, decolonization can only be seen as a partial process, so the minority’s struggle must be waged both as anti-colonial and as a struggle to secure a proper status within the new state.