The Naftali Bennett-led government had agreed to amend the law to provide 1600 Paelstininans living in Israel residency visas and an extension of six months to thousands of other Palestinians living in Israel to find solutions.

Former Prime Minister Benjamin Netanyahu's Likud Party also voted against the law as it is against the extension clause of the law though it supports the law in principle.

The Islamist Ra'am party, also known as the United Arab List, which made history by joining a coalition government in Israel for the first time, split is four votes, with two voting for the regulation and two abstaining, denying the coalition the majority it needed to pass the regulation in Knesset.

The rule dates back to 2003 when it was introduced as a temporary ordinance but was later expanded to prevent the people from Iran, Iraq, Syria and Lebanon from becoming citizens through their Israel. Although people over a certain age get annual permits are issued to allow them to live in Israel without allowing them citizenship.

According to CNN, critics say the regulation is racist that forces families to live apart while its supporters contend that it is necessary to filter out terrorists, who would purposely become Israeli citizens to carry out attacks and  in order to preserve Israel's status as the only Jewish state.