The JNF also controls land owned by Palestinians before they fled or were driven from their homes when Israel was founded.
Another bill makes eligibility for national insurance benefits dependent on completing military service. Few Arabs serve in the army: unlike for Jews, service is not compulsory.
"The Palestinians inside Israel are being discriminated against in all spheres except for one: the right to vote," Mohammad Barakeh, a member of Israeli parliament, said.
Olmert's spokesman Regev said the bills did not reflect racist attitudes against Arabs, rather "legitimate differences of opinions".
LICENCE TO KILL?
About 1.5 million Arabs reside in Israel with 5.5 million Jews, but 3.8 million Palestinians live in the West Bank, Gaza and East Jerusalem.
U.S. President George W. Bush is hoping for an agreement this year to create a Palestinian state in the West Bank and Gaza Strip alongside Israel.
To Israelis, the government justifies holding talks about creating a Palestinian state by saying the alternative is a single state where Arabs would soon outnumber Jews.
A recent poll by Israel's parliamentary TV station showed 76 percent of Jewish Israelis give some degree of support to transferring Palestinians living inside Israel to a future state - an option most Arab citizens strongly reject.
"The Jews are the ones who immigrated to our homeland and took our land. We did not immigrate to their land so we cannot leave," said Jamal Zahalka, an Arab lawmaker.
The outbreak of the latest Palestinian intifada marked a turning-point in the way Israel treats its Arab citizens, many say, especially after 13 unarmed Israeli Arabs were killed in October 2000 when police used live ammunition to disperse protests in support of Palestinians in the occupied territories.
Rights groups say a January Israeli court decision not to indict the alleged killers due to "insufficient evidence" was tantamount to giving police a license to kill Arabs.
Two rights groups documented the killing of 41 Arabs by Israeli police or in "racist attacks" by Jews and security guards since 2000. Of those, only one suspected killer has been indicted, said Jafar Farah, director of advocacy group Mossawa.
"The message of (this court's) decision is the following: Israel is allowed to kill Arabs and to make mass arrests," said Abeer Baker, a lawyer with advocacy group Adala in Israel, which represented the families of those killed in the 2000 protests.
The court case rekindled painful memories for the families of those killed.
"They are re-opening my wounds," said Raoofa Lawabneh in Sakhnin in northern Israel as she held a poster of her son, Iyad, who was among those killed. "I wish to see his killer in jail before I die," said the 68-year-old mother of eight.
Many Israeli Arabs say they have lost faith in Israeli justice, arguing police were more restrained while dispersing gatherings by Israeli Jews.
"How come in a country that claims democracy, policemen shoot and kill citizens but no charge sheet is made?" asked Mossawa's Farah. "When it comes to Arab citizens, the law-abiding state does not exist."
