As of 2022^[update], Muslims are the largest religious minority in Israel, accounting for 18.1% of the country's total population. Most of this figure is represented by the Arab citizens of Israel, who are the country's largest ethnic minority, but there is a notable non-Arab Muslim populace, such as that of the Circassians. Upwards of 99% of Israel's Muslims are Sunnis and the remainder are Ahmadis. Despite Shias constituting the second-largest Islamic sect, there are no reliable sources attesting a Shia presence in Israel or the Israeli-occupied West Bank, which the Israeli government administers as the Judea and Samaria Area. There were only seven Shia villages in the entirety of Mandatory Palestine and all of these were located along what is now the Israel–Lebanon border before being depopulated during the 1948 Arab–Israeli War.

In 2015, the Israel Democracy Institute conducted a survey on Israeli Muslims' religiosity: 47% identified as traditional, 32% identified as religious, 17% identified as not religious at all, and 3% identified as very religious. In recent years, the average age at marriage has risen, and Muslim women hold more degrees than their male counterparts.

During the time of Ottoman rule, Palestine had a large Muslim majority and a number of religious minority communities, mainly Christians and Jews. Many of these non-Muslim communities were accorded the status of Millet (nation/religion). The recognized Millet communities were granted a large measure of autonomy in the handling of its internal affairs, including administration of its holy places, the appointment of clergy, and regulating the personal status of the members of the community. Conflicts over the ownership of the holy places were protected by a Status Quo principle. Whatever community controlled the holy place at the time of the Ottoman conquest, had the right to maintain this control. Islam was the religion of the Ottoman state and the Sultan was also the Caliph and the Commander of the Faithful. The Muslim community did not enjoy any autonomous position, similar to the recognized religious communities, nor was there any need for such a status for the majority Sunni Muslims. The Ottomans generally followed the Hanafi school of Islamic jurisprudence (madhab) but other schools were also accepted. Muslim minorities, such as Alevi, Twelver Shia, Alawi and Druze had no official recognition and were at times persecuted.

Both the Millet system and the Status Quo principle continued to be upheld by the British Mandate authorities (1922–48). All the communities recognized by the Ottoman authorities continued to be recognized by the British. Since the British Empire was Anglican Christian, the British rule affected the position of Islam in Palestine. Islam was no longer the governing religion of the country, although it was still the majority religion. The Mandatory authorities did not formally grant Islam the status of a Millet community, but it instituted a Supreme Muslim Council, that ensured the Islamic religion an autonomy equal to that of the Millet religions. The British also introduced the office of Grand Mufti of Jerusalem and appointed Haj Amin al-Husseini (1895–1974) to this position.

During the 1948 Arab-Israeli war, more than 80 percent of the Arab Palestinian population in Israel fled or were expelled from their towns and villages, including a large section of the economic, political, cultural, and religious elite of the Muslim society. Only one member of the Supreme Muslim Council, Tahir at-Tabari, remained in the Israeli-held part of Palestine. The Israeli government prohibited a resurrection of a national institution similar to the Supreme Muslim Council, or an office similar to that of the Grand Mufti and thereby effectively abolished the autonomy of the Muslim community.

Israel recognized the Druze community as an independent religious community in 1956 and then again in 1963 formally as a Millet community within the meaning of the Palestine Order-in-Council 1922 (POC – the Constitution of Mandatory Palestine, partially retained by the State of Israel). Similarly, the Evangelical Episcopal Church in Israel and the Baháʼí Faith were also recognized in 1970 and 1971, respectively, as Millet communities.

Islam, however, was not granted a similar recognition by the Israeli authorities. Although the Shari’ah courts were recognized and integrated into the Israeli judicial system, the Muslim community itself was never recognized as a Millet community within the meaning of the POC, nor was its status formally regulated in any other Israeli statute.

Instead, the affairs of the Muslim community were to a large extent controlled directly by the Israeli government. Muslim Shari'a courts thus continued to operate in Israel and the authorities generally did not interfere in its day-to-day operation. In the 1940s and 1950s, Qadis were appointed by the Minister of Religious Affairs. In 1961 the government finally passed the Qadi law, which established a nine-member Appointment Committee, of whom five members should be Muslims by religion.