When Israel annexed Jerusalem in 1967 it made Jerusalemites permanent residents of Israel, but not citizens. In effect, they were deemed ‘resident aliens’ in their own city. They are not eligible for Palestinian passports. This was/still is, designed to pressure them to leave their city by all means. Residency can be annulled from any Jerusalemite, at any time. Discrimination against Palestinians continues. This paper will document and analyze discrimination against Palestinians in Jerusalem in Israeli laws, policies and practices. The paper will analyse such policies and practices from the perspective of international law. It will also assess whether such practices are in contravention of Zionist ideology or an integral part of it. Did Zionism foresee or seek to establish a system of ‘distinctions, exclusions, restrictions and preferences’, or was this system only an unfortunate result of an erroneous implementation of the Zionist dream? Jerusalem can be used as a case study where all these questions and more can be answered effectively in this microcosm of racial discrimination.