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Chairman of the Jewish Agency: Arie Dulzin.

Immigration reaches a low in 1986. Immigration to Israel had fluctuated between 12,000 and 22,000 immigrants annually during 1980-1985, originating mostly from the Soviet Union. The flow from that country, however, diminishes steadily, both because of obstacles designed by the Soviet authorities and a reluctance on the part of Jewish emigrants to settle in Israel. The latter factor is reflected in a high "drop-out' rate by Soviet Jews en route to Israel, primarily at the transit point in Vienna, where 65% to 90% of them switch their destination to the US or Canada.

New immigrants in 1986: 9,505. This number is unprecedented in 43 years. Of approximately 1,000 Jewish emigrants permitted to leave the Soviet Union, only 209 arrive in Israel.

The immigrant of the year is indisputably Anatoly (Natan) Sharansky, the Prisoner of Zion, who was held by the Soviets for nine years while his wife Avital fought for his release. Freed in February, he is given a state reception by Prime Minister Shimon Peres upon his arrival in Israel. US President Ronald Reagan is one of the first to congratulate him on his release.

A total of 250 settlements in all parts of the country enjoy the care, guidance, and support of the Jewish Agency which since the establishment of the state has been responsible for 556 settlements but the greater part of these has meanwhile achieved organizational and economic independence.

January 1: The validity of the old shekel expires. The new Israeli shekel (NIS) is the sole legal tender.

January 21: Hundreds of workers at Israel Shipyards take over the plant on being notified that they must take an unlimited leave of absence.

January 29: Screening for AIDS is initiated for all blood donations.

A Jordanian soldier opens fire at an IDF patrol along the border. Two Israeli soldiers are killed and another two are wounded.

January: Israel agrees to submit to arbitration the ownership of Taba. A tiny coastal strip south of Eilat containing a hotel, Taba has been the subject of an Egyptian-Israeli dispute since the signing of the 1979 peace treaty.

February 4 : Israel intercepts a Libyan civilian jet flying from Tripoli to Damascus, mistakenly believing Palestinian terrorist leaders are aboard. Syria sponsors a UN Security Council resolution condemning Israel, which the US vetoes. The US deplores the Israeli action but says the resolution does not recognize the right of states to intercept aircraft under "exceptional circumstances".

February 15: A surprising negative cost of living index of -1.3% is registered for the month of January, spurring price reductions.

February 17: Terrorists kidnap two IDF soldiers in southern Lebanon. Israeli forces in the security zone move northward in an attempt to locate them.

February: Israel and Spain establish diplomatic relations.

February: Jordan's King Hussein announces the termination of year-long discussions with Yasser Arafat about possible Middle East peace initiatives.

February: Dov Zakheim, US Defense Department official, estimates that Lavi jet fighter production costs would far exceed Israel's estimates. Israel continues the development of the fighter.

February: The Knesset defeats an amendment to the Law of Return that specifies that a person is Jewish for the purpose of the Law of Return only if the conversion was performed according to the halacha. The change would have rendered invalid conversions done by non-Orthodox rabbis.

February: Terrorists plant explosives in various locations throughout the country: Ramat Gan, Haifa, Afula, Bnei Brak, and Beit Shean.

March 11: Violence erupts during the Herut convention. Ministers Ariel Sharon and David Levy form an alliance precluding MK Benny Begin's membership in the election committee. Sharon is elected chairman of the committee.

March 19 : Four Israelis are attacked in Cairo. One, the wife of an Israeli diplomat, is killed.

March 27: A Katyusha missile attack on Kiryat Shmona wounds four persons. The IDF retaliates with an air and ground attack on terrorist targets in southern Lebanon.

March: Nablus Mayor Zafr al-Masri is assassinated by Palestinian terrorists, who warn against any Arab West Bank cooperation with Israel or Jordan.

April 13: The unity government survives a crisis that erupts when Finance Minister Modai calls Peres a "flying prime minister" - a reference to his numerous trips abroad - prompting Peres to seek to dismiss him. A solution is found whereby Modai switches portfolios with Justice Minister Moshe Nissim.

April 20 : A judicial commission of inquiry into the regulations of bank shares headed by Supreme Court Justice Moshe Beisky calls for the resignation of leaders of Israel's major banks and the governor of the Bank of Israel. In June, a Hebrew University professor of economics, Michael Bruno, will be named the governor of the Bank of Israel.

April: The duration of daylight saving time is to be reduced as a result of pressures by the religious sector (early sunrise inconveniences morning worshippers). The general public is angered.

May 24 : British Prime Minister Margaret Thatcher visits Israel. Hers is the first visit to Israel of an incumbent British prime minister.

May 25: Attorney General Yitzhak Zamir indicts the head of the Shabak (General Security Service) for covering up the killing of two terrorists captured alive during the Bus Nr. 300 incident in 1984. The mover mars relations between Zamir and several government ministers.

May 28: The Shabak affair intensifies. Justice Minister Yitzhak Modai appoints attorney Amnon Goldberg as his special counsel, a step designed to circumvent the attorney general.

June 23: The nurses announce a strike and leave the hospitals.

June 26: The Shabak affair continues. The head of the Shabak is pardoned by the president for all acts related to the Bus Nr. 300 incident. The head of the Shabak submits his resignation.

July 2: US envoy Abraham Sofer arrives in Israel to mediate the Taba issue.

July 10: An IDF sea patrol vessel encounters a terrorist-manned boat off Rosh Hanikra at Israel's northern border. All four terrorists are killed in an exchange of fire. The IDF incurs two fatalities and nine wounded. The terrorists were bound for Nahariya on a kidnapping mission.

July 15: The city of Tel Aviv-Jaffa dedicates Ya'akov Agam's kinetic sculpture "Fire and Water" at Dizengoff Square.

July 21 : Israel unveils a prototype of the Lavi jet fighter. US officials urge Israel to abandon the project as it is too costly and, instead, purchase an updated F-16 fighter, which will use technology developed for the Lavi.

July 22 : Prime Minister Shimon Peres visits Morocco and confers with King Hassan. The meeting has symbolic value, with Morocco being the second major Arab country to confer with Israel. Radical Arab states condemn the meeting, and Syria severs diplomatic relations with Morocco.

July 27: US Vice President George Bush, visiting Israel, calls upon his countrymen to do likewise.

July 29: The Knesset ratifies a law introducing cable TV in Israel.

August 5: After numerous delays, the Knesset ratifies a law prohibiting racial incitement.

August 10: The Lake Kinneret water level drops to a 50-year low of 212,89 meter below sea level. In September the National Water Carrier will shut down for the first time since its inauguration in 1964 as a result of the low water level in the Kinneret.

August 21: Israel's first in vitro babies - quadruplets - are born in the Sharon hospital in Petah Tikvah.

August 24: President Chaim Herzog pardons seven Shabak operatives connected with Bus Nr. 300 incident.

August: Prime Minister Peres visits Cameroon, after the renewal of diplomatic relations between the two countries.

August: The US and Israel sign an agreement for the construction of a 250 million dollar Voice of America relay station in the Negev that would make it more difficult for the Soviets to jam broadcasts. The station will take five years to build.

August: Israeli and Soviet officials hold a brief meeting at Helsinki, their first official contact since the Soviet Union severed relations in 1967.

August: The cabinet approves the construction of a Mormon Center for Near Eastern Studies in Jerusalem in the face of Orthodox opposition. 154 members of the US Congress urged support for the construction of the center.

September: A government crisis erupts over criticism voiced by Minister of Trade and Industry Ariel Sharon of the government's response to the terrorist attack in Istanbul. Demands for Sharon's dismissal prompt him to apologize to Peres.

September: A survey of Arab public opinion in Israel records that over 90% believe the PLO is the sole and legitimate representative of the Palestinian people and that 78% prefer the establishment of a democratic Palestinian state.

September: A report records 60,000 Jews living on the West Bank. Over 66% reside in suburbs of Tel Aviv and Jerusalem, including 12,000 in Ma'ale Adumim, a Jerusalem suburb, on the road to Jericho.

September 29 : John Demjanjuk is indicted in a Jerusalem district court of crimes under the Nazi and Nazi Collaborators Punishment Law of 1950. He says: "I was never in a place you call Treblinka and I never served the Nazis. I myself was a prisoner of war." His trial is scheduled for 1987.

October 5 : The London "Sunday Times" publishes a story, "Inside Dimona. Israel's Nuclear Bomb Factory", which asserts that the Dimona facility produced an arsenal of 100-200 nuclear weapons. The newspaper lists Mordechai Vanunu as the source. He is a former technician at Dimona who was dismissed in 1985.

October 15 : Terrorists attack new IDF recruits and their families with grenades outside the Dung Gate in Jerusalem's Old City. One person is killed, 70 are wounded.

October 16: An Israeli plane is downed over southern Lebanon. The pilot is rescued but the navigator, Captain Ron Arad, is captured, marking the beginning of a dogged quest by Israel to bring him home.

October 20 : Yitzhak Shamir replaces Shimon Peres as prime minister. Within the National Unity Government, Peres is determined to move the Israeli-Arab conflict forward from its parlous condition, typified by the continuing state of war with Syria, Lebanon and Jordan, and exacerbated by growing Palestinian unease at the Israeli occupation of the West Bank and Gaza, to the level of negotiation, compromise and agreement. Underlying Peres' approach is the conviction that Israel's Arab neighbors, and the Palestinians are equal participants in the problems and opportunities of the region.

October: An agreement is signed for the amalgamation of the Labor Party and Yahad.

November 9 : Israel announces that Mordechai Vanunu, dismissed Dimona nuclear facility technician, is under detention.

November: Israel signs an agreement with the US to participate in the Strategic Defense Initiative, joining Great Britain and West Germany in the Star Wars program. Israel will undertake research in tactical ballistic missile systems.

November 15 : A yeshiva student is stabbed to death by terrorists in Jerusalem's Old City. Retaliation by local Israelis forces Arab families living near the yeshiva to flee their homes.

November: Iranian sources are quoted in a Lebanese magazine, claiming that Robert McFarlane, former US national security adviser, offered to send arms to Iran in exchange for the release of hostages held in Lebanon. US news reports confirm the story and that the US had encouraged third parties, including Israel, to make similar shipments.

November: Israel confirms that it helped transfer arms from the US to Iran upon the request of the US, but denies that it had served as a channel for the transfer of funds to the contras. (President Ronald Reagan had announced that between 10 and 30 million dollars in profits from the sale of US arms to Iran had been secretly diverted to assist contra rebels fighting the Nicaraguan government.)

December 2 : The Supreme Court rules against Interior Minister Rabbi Yitzhak Peretz in the matter of Shoshana Miller, a Reform convert to Judaism, whose request for citizenship under the Law of Return was granted. Miller had objected to Peretz's requirement that the word "convert" be printed on her identity card. The court rules that traditional Jewish law forbade shaming a convert. Minister Peretz will resign at the end of the month.

December 4-9: Arab rioting erupts in the West Bank and Gaza Strip, resulting in the death and wounding of Palestinians.

December 8: Arbitration talks begin between Israel and Egypt regarding Taba.

December: A prototype of the Lavi jet fighter makes its maiden flight.

December: Heavy rains elicit optimism by the country's farmers and hydrologists.

The cost of living rise is the lowest in eight years: 48.1%.

Anton Shammas, an Israeli Arab, writes "Arabesque", and autobiographical novel depicting 150 years of history in the author's home village of Fassuta in Upper Galilee. It is the first significant work of Hebrew literature written by a non-Jew.

A 2,000-year-old boat is uncovered beneath the waters of the Sea of Galilee, the first ancient vessel ever to be retrieved in Israel.

The Antiquities Department announces that the remains of a vessel discovered off the Mediterranean coast in 1985 near Kibbutz Ma'agan Michael is probably the first Phoenician ship found anywhere. According to pottery found on the ship, it was dated to the late 5th or early 6th century BCE.

The Israel Museum exhibits two tiny silver amulets on which were etched the oldest biblical text ever found. Dating to the 6th century BCE, the inscriptions contain versions of the threefold priestly benediction found in Numbers 6. It predates the Dead Sea Scrolls by 400 years. The amulets were excavated in Jerusalem's Hinnom Valley in 1979.

The Israel Museum exhibits 600 items from Moshe Dayan's antiquities collection, which is purchased from his wife for one million dollars. The purchase is criticized, as it is alleged that Dayan required many of the objects through questionable methods.

The Museum of the Diaspora exhibits "From Carthage to Jerusalem: The Jewish Community in Tunis"; "Kovno Ghetto - Images from a Hidden Camera"; "Passage Through China: The Jewish Communities of Harbin, Tientsin, and Shanghai"; and "In the Footsteps of Columbus: Jews in America, 1654-1880."

The IDF produces "Ricochets", a feature-length film describing an infantry unit in combat in Lebanon, which becomes a box office success.

February 10 : Anatoly Sharansky, leading Soviet refusnik, is released from prison and exchanged in Berlin for persons held by the West.

February: John Demjanjuk, a retired Cleveland autoworker, is the first alleged Nazi war criminal extradited by the uS to Israel. In 1981, he was stripped of his US citizenship for misrepresenting his past when he arrived in the US in 1952. US courts in Cleveland heard testimony that he had been a guard at the Treblinka concentration camp, was known as "Ivan the Terrible" and brutalized camp inmates as they were led to the gas chambers.

March: The World Jewish Congress releases information linking Kurt Waldheim, former UN secretary-general and current candidate for the presidency of Austria, to Nazi actions against civilians during World War II. Austrian news magazine "Profil" and the "New York Times" report the discovery of documents linking him to Nazi activity in the Balkans in 1942-1943, although his autobiography states he ended his military service in 1941. The accusations are criticized by veteran nazi hunter Simon Wiesenthal for lack of any real evidence of "crimes by Waldheim".

March: The US Supreme Court rules that the air force did not have to alter its dress code to allow Captain Simcha Goldman to wear his skullcap while on duty.

March: The Georgia Board of Pardons and Paroles grants a posthumous pardon to Leo M. Frank, who was convicted in 1913 of the murder of Mary Phagan. It was in this atmosphere that the Anti-Defamation League was established in 1913. The pardon is granted "in recognition if the state's failure to protect the person of Leo Frank and thereby preserve his opportunity for continued legal appeal of his conviction, and in recognition of the state's failure to bring his killer to justice, and as an effort to heal old wounds."

April: Israeli security personnel at London's Heathrow Airport discover a bomb concealed in a bag carried by a pregnant woman boarding an El Al flight to Tel Aviv. British police arrest Nezar Hindawi, whom they accuse of tricking the woman, his friend, into carrying the bomb.

April 13: Pope John Paul II visits the Central Synagogue in Rome. No pope has ever before entered a Jewish house of worship. The ceremony is broadcast live around the world.

April: Vladimir Horowitz, world-famous pianist, returns to perform in the Soviet Union for the first time since 1925. His concerts are part of a cultural exchange agreement concluded by Ronald Reagan and Mikhail Gorbachev. In 1980 Horowitz had said: "I don't like the Russian approach to music, to art, to anything. I lost all my family there. I never want to go back and I never will."

June: Jonathan Jay Pollard pleads guilty in a US district court in Washington DC, to participating in an Israeli-directed espionage conspiracy against the US.

June: Ernst Nolte, leading German historian of the revisionist school, suggests that Auschwitz resulted from the Nazi fear of the Soviets and accuses critics of Nazism of ignoring the fact that the Nazis had done what others had previously done "with the sole exception of the gassing procedures."

June 26: An El Al security officer in Madrid thwarts an attempt to plant a booby-trapped suitcase on a plane. The suitcase explodes on the airfield, slightly wounding 13, including the security officer.

July: Italy brings to trial the hijackers of the "Achille Lauro". The confessed murderer of Leon Klingshoffer is sentenced to 30 years in prison, instead of life, as requested by the prosecution. The judge and jury accepted his claim of "extenuating circumstances" as he "had grown up in tragic conditions."

September: Palestinian terrorists massacre 22 worshippers in an attack on the Neve Shalom synagogue in Istanbul.

October: Nezar Hindawi is convicted of having plotted to place a bomb on an El Al aircraft at London's Heathrow Airport in April. Britain severs diplomatic relations with Syria, stating that it has "conclusive evidence" that Syria trained Hindawi, supplied the bomb, and directed the plot. The US and Canada recall their ambassadors to Syria.

The Netherlands State Institute for Documentation of the Second World War publishes a scientific edition of the "Diaries of Anne Frank", which refutes neo-Nazi claims that the work was a forgery and contains all the passages omitted in the edition edited by her father, Otto Frank, because he believed them to be too personal.

The remains of a synagogue dating from the 4th century CE are uncovered by archaeologists in Bova Marina in southern Italy.

Elie Wiesel, literary interpreter of the Holocaust, is awarded the Nobel Peace Prize.

Deborah Lipstadt, US historian, writes "Beyond Belief: The American Press and the Coming if the Holocaust: 1933-1945." She demonstrates that the significance and scope of the news events were persistently ignored, as the editors were skeptical of the accuracy of the reports of the "final solution."

Walter Laqueur and Gerald Breitman, US historian, write "Breaking the Silence", in which they reveal the story of Eduard Schulte, a leading German industrialist who in July 1942 was the first to alert the Allied governments of the Nazi plan to exterminate the Jews. Schulte passed word of the "final solution" to the American legation in Bern, Switzerland.

Philip Roth, US author, writes "The Counterlife", an experimental novel in which he attempts to convince the reader to to equate Nathan Zuckerman with Roth. It includes a consideration of Israeli nationalism in the occupied territories.

"The Book of Abraham", an epic novel by Marek Halter", French novelist and activist, appears in English translation. It is a fictional account of Jewish survival, spaning the history of the Diaspora as experienced by one family. An escapee of the Warsaw ghetto, Halter is active in French Jewish communal affairs and was appointed the first director of the Center of Judaism in Paris by President François Mitterand.

The Metropolitan Museum of Art in New York exhibits "Treasures from the Holy Land: Ancient Art from the Israel Museum".

The Jewish Museum of New York exhibits "Treasures of the Jewish Museum", 90 pieces from its permanent collection, and Moshe Zabari: A 25 Year Retrospective.

The announcement is made of the proposed Museum of Jewish Heritage - A Living Memorial to the Holocaust to be built in New York.

Rita Levi-Montalicini and Stanley Cohen are awarded the Nobel Prize in Physiology or Medicine.