Air force fighters in formation and manouvering gunboats salute the state of Israel

Large crowds watched air force fighters in formation and gunboats off the coast. For other Israelis it was a day of picnics in parks and beach barbecues.

The highlight of the festivities was an evening gala concert in a Jerusalem stadium attended by American Vice-President Al Gore.

Mr Gore addressed the crowd in Hebrew as "the people of Israel".

Al Gore delighted the crowd by starting his speech in Hebrew

He noted that the United States was the first country to recognise Israel at its founding in 1948.

America has been Israel's staunchest supporter since its creation when founding father David Ben-Gurion declared independence.

The planned dance caused outrage among Orthodox Jews

Prime Minister Binyamin Netanyahu drew applause from the crowd, including Mr Gore, when he said of Jerusalem: "We have united this city, never to be divided again."

However, the evening was not without controversy.

A modern dance group pulled out at the last minute in protest at demands by religious Jews to change a segment in which they strip to their underwear.

While Israelis celebrate, most Palestinians are confined to the West Bank and Gaza Strip, which have been sealed off.