Despite its military might, Israel was unable to quell the intifada which started in 1987 and was backed by the entire Palestinian population living under Israeli occupation.
For the PLO - based in Tunis since its expulsion from Lebanon in 1982 - the uprising threatened the loss of its role as the main player in the Palestinian "revolution" as focus shifted to the occupied territories and away from the diaspora population.
The Palestinian National Council (a government-in-exile) convened in Algeria in November 1988 and voted to accept a "two-state" solution based on the 1947 UN partition resolution (181), renounce terrorism and seek a negotiated settlement based on Resolution 242, which called for Israel to withdraw from territory captured in the 1967 war, and Resolution 338.
The US began dialogue with the PLO. But Israel continued to view the PLO as a terrorist organisation with which it would not negotiate. Instead, Israeli Prime Minister Yitzhak Shamir proposed elections in the occupied territories before negotiations on a self-rule agreement.