JERUSALEM — Hanan Porath's army unit was among the first to reach the Western Wall in old Jerusalem, Judaism's holiest site — and it felt like deliverance after 2,000 years of exile and persecution.

"A flow of electricity moved through the entire Jewish people," said the former paratrooper, recalling how in 1967 he and his comrades wept next to the wall, shaking with emotion, following Israel's stunning victory over three Arab armies in the Six-Day War.

After the war, Israel cleared a plaza in front of the wall so Jews could pray there. Among the buildings it demolished was the ancestral home of Raji Burqan, who sold socks and handkerchiefs nearby before he, his pregnant wife and 16 other family members were sent packing to the outskirts of Jerusalem.

"When I first saw an Israeli in 1967, I lost my dignity," he said.

Four decades after an underdog Israeli military captured the world's imagination, the Jewish state is still struggling to come to terms with its victory. The war tripled in size the land under Israel's control and eliminated a threat to its survival. But with victory came burdens, hatreds and many, many deaths for both Israelis and Palestinians.

Today, a majority of Israelis and Palestinians long for a peaceful compromise, but seem no closer than 40 years ago. Mistrust runs deep after convulsions of violence. Israel's settlement expansion and the rise to power of the Islamic militant Hamas movement in the Palestinian territories raise doubt about whether the solution preferred by most — setting up a Palestinian state alongside Israel — is possible.

Supporting an occupation has cost Israel tens of billions of dollars, diverted from education and health to security and settlements. Its reputation in much of the world has gone from darling to bully.

The vaunted Israeli soldier has become a de facto policeman, stopping Palestinians at roadblocks, rifling through drawers and closets in arrest raids and suppressing rock-throwing crowds. Last summer's failed war with Hezbollah guerrillas in Lebanon showed the decline.

The ultimate desire of most Israelis, for permanent, recognized borders, remains elusive.

Avshalom Vilan, a dovish Israeli lawmaker who was 16 when the 1967 war broke out, compared the ensuing decades to the biblical wanderings of the ancient Israelites.

"We are basically in the desert for 40 years," he said. "We lost our balance as a state, as a people. We lost all proportion of what is possible, and what is not."

Forty years into the occupation, the Palestinians are ground down, their hopelessness worsened by an international aid embargo imposed after Hamas' rise to power. But the war and occupation cemented Palestinian identity even as it scattered them as a people.

Two uprisings, including a suicide bombing campaign that has killed hundreds of Israelis since 2000, have provoked harsh Israeli restrictions and a decision to separate the two peoples with a new wall.

Israel's West Bank separation barrier has helped keep out bombers but also prevented many Palestinians from leading normal lives. Towns are ringed by checkpoints, the U.N. says about half the West Bank is now off-limits to Palestinians, and stories abound of tragedies caused by delays, including a young woman who died when she couldn't get to her kidney dialysis treatment.

"We are raising commanders who are policemen," former Israeli general Amiram Levine told the newspaper Maariv. "We ask them to excel at the checkpoint. What does it means to excel at the checkpoint? It means being enough of a bastard to delay a pregnant woman from getting to the hospital."

Major roads in the West Bank are reserved for Jewish settlers only — a reality that has drawn comparisons to South Africa's apartheid, including a statement in a recent book by former President Carter.

Israel is not to be blamed for these hardships, said Dore Gold, a former Israeli ambassador to the United Nations. It's because the late Palestinian leader, Yasser Arafat, "allowed these territories to become the base of terrorist organizations that repeatedly struck Israel with suicide bombing attacks," he said.

In the first 20 years after the war, Israel prided itself on running an "enlightened" occupation, and the Palestinians largely acquiesced to Israeli rule.

Israel tapped into a deep pool of cheap labor, employing 40 percent of the Palestinian work force by the mid-1980s and sold its goods to a captive market. Palestinians earned more as construction workers, waiters and gardeners in Israel than they would at home.

Roads were open. Israelis had their cars fixed and bought wicker furniture in Gaza, or spent weekends sampling hummus and pomela, an exotic citrus, in the desert oasis of Jericho.

Many Palestinians picked up Hebrew, went on day trips to Tel Aviv's beaches, even listened to Israeli pop songs. Hafez Serawi, a taxi driver who now needs a permit to leave the West Bank city of Nablus, used to drive across Israel and knew all the back roads.

But Israel also cracked down on any display of Palestinian nationalism. Flying the Palestinian flag was illegal. Israeli security agents, relying on Palestinian informers, ferreted out "troublemakers."

Palestinian policeman Abdel Karim Mansour, born in the West Bank refugee camp of Jenin a half year before the 1967 war, said he was just 14 when soldiers threw him in jail for 11 days for carrying anti-occupation leaflets. He then spent 3Z\x more years in prison for belonging to a then-illegal group, Arafat's Fatah movement, after his unit in the group threw a firebomb at an army jeep.

Resentment at occupation boiled over in December 1987. A fatal traffic accident was seen by Palestinians as an intentional attack on Gaza laborers. That uprising lasted six years, ending only when Israel and the Palestine Liberation Organization agreed to recognize each other's existence.

There were interim peace deals in the 1990s, aimed at a "two state solution." But Arafat refused to give up his demand that Palestinian refugees be allowed to return to villages in Israel, while Israel kept building settlements on Palestinian territory.

The latest Palestinian uprising, in which more than 4,300 Palestinians and 1,100 Israelis have died since 2000, cemented Israel's determination to cut itself off from the Palestinians. Prime Minister Ariel Sharon removed all Israelis from Gaza in 2005 and began building the separation barrier in the West Bank.

Israelis tend to go about their daily lives without giving much thought to the Palestinians. But deadly rocket attacks from Gaza into southern Israel serve as reminders that the conflict is always there.