Under the agreement, Meretz and Labor continue as separate corporate and budgetary entities, and their factions in the Histadrut, municipal councils and other bodies outside the Knesset will not merge at this stage but will cooperate.

The alliance, called the Labor Alignment, won 45 seats in the elections, and was able to form the government in coalition with the National Religious Party, Mapam, the Independent Liberals, Poalei Agudat Yisrael, Progress and Development and Cooperation and Brotherhood.

On 23 January 1968, Mapai, Ahdut HaAvoda and Rafi (with the exception of Ben-Gurion, who formed the National List in protest) merged into one body, creating the Israeli Labor Party.

In the 1984 elections, Labor joined a national unity government with Likud, with the post of Prime Minister rotating between the two parties.

Mapam broke away again during the eleventh Knesset, angry at Shimon Peres's decision to form a national unity government with Likud.

[42] In addition, investments were made in numerous development projects[43] while affirmative action programmes were launched to hire Palestinian citizens in the public sector, the Ministry of Interior increased the budgets for Arab local councils, and the Ministry of Education increased the budget for Arab education.

[44] The subsequent role of Labor became to a large extent tied to the Oslo Accords, based on the principle "land for peace".

Rabin's decision to advance peace talks with the Palestinians to the point of signing the Oslo Accords led to his assassination by Yigal Amir in 1995.

Barak started by forming a 75-member coalition, together with Shas, Meretz, Yisrael BaAliyah, the National Religious Party, and United Torah Judaism.

However, Labor remained in Sharon's coalition as he formed a national unity government with Likud, Labor, Shas, Yisrael BaAliyah and United Torah Judaism, and were given two of the most important cabinet portfolios; Peres was appointed Minister of Foreign Affairs and Benjamin Ben-Eliezer was made Defense Minister.

After harsh criticism that Peres and Ben-Elizer were "puppets" of Sharon and not promoting the peace process, Labor quit the government in 2003.

Subsequently, due to internal opposition, Mitzna resigned from the party leadership,[45] and soon afterwards was replaced by Shimon Peres.

Several prominent members left the party, including Ami Ayalon, and Efraim Sneh (who formed Yisrael Hazaka).

In the elections, Labor was reduced to just 13 seats, making it the fourth largest party behind Kadima, Likud and Yisrael Beiteinu.

[citation needed] Analysing the downfall of the once dominant political party in Israel, Efraim Inbar of the Begin-Sadat Center for Strategic Studies points to several factors.

Demographic factors have worked against Labor, as the growing Sefardi population, as well as the recent Russian-Jewish immigrants, have largely voted for other parties.

Attempts to gain the support of the Israeli Arab voters have damaged the image of the party, and yielded no harvest.

Two days after the split, a group of prominent members of Israel's business, technology, and cultural communities including Jerusalem Venture Partners founder Erel Margalit founded the "Avoda Now" movement calling for a revival of the Labor Party.

The movement launched a public campaign calling the people to support the Labor Party, with the aim of renewing its institutions, restore its social values, and choose new dynamic leadership.

[52] In the 2015 legislative election on 7 March 2015, the joint list Zionist Union received 24 seats in the Knesset, of which 19 belong to the Labor Party.

[54] Labor's support collapsed in the April 2019 legislative election, being reduced to only 4.43% of votes and 6 seats, marking it as the worst result in the party's history.

Longtime party member Peretz criticized Gabbay, tweeting "We will not enter or sit in his [Netanyahu] government.

[58] On 12 January 2020, Labor announced that it was negotiating a joint list with Meretz to prevent the possibility of either party not making the electoral threshold and not entering the Knesset.

[63] In March 2020, Gesher's only MK Orly Levy announced that she was splitting from the union due to their support of Benny Gantz's efforts to set up a minority government with the Joint List, with him as Prime Minister.

[67] On 22 April 2020, it was announced that Labor Party leader Amir Peretz would serve as Israel's Economic Minister as a result of a coalition agreement which was made following the 2020 Israeli legislative election and will coordinate with Blue and White on parliamentary matters and policy issues.

[68][69][70] Despite agreeing to join the new government, Peretz also stated that he and other Labor MKs will still vote against a proposed West Bank annexation plan.

Under Ben-Gurion's leadership (1930–1954), Mapai focused mainly on a Zionist agenda, as establishing a homeland for the Jewish people was seen as the most urgent issue.

In November 2005, Amir Peretz, leader of the social-democratic One Nation which had merged into Labor after a split in 1999,[84] was elected chairman of the party, defeating Shimon Peres.

[14] On social issues, Labor supported same-sex marriage, the legalisation of cannabis, advancing surrogacy rights for gay couples and organized public transportation on Shabbat.

[85] The party opposed the Nation State Bill in 2018, and after its passing pledged to adding a clause emphasising equality for all citizens.