The new government formed by Yitzhak Rabin, did not include central figures, including Moshe Dayan, who had been found to share in the responsibility for the failure. The shock caused by the war did not manifest itself in the results of the elections held at the end of 1973 but a substantial protest movement started to develop.

The ideological polarization on the issue of the future of the territories occupied during the Six Day War also started to develop in this period, especially after the the disengagement agreements were signed with Egypt and Syria in 1974, and the Interim agreement signed with Egypt in 1975, which were based on the principle of territories for peace. Gush Emunim was established in Febraury 1974 and the ideological settlement in the territories was accellerated.

During this period Israel's isolation in the international arena began, as reflected in the UN General Assembly resolution of 1975, which compared Zionism and racism. As a result of this development Israel's dependence on the US grew. Following the immigration wave in the early 1970s, the gates of the Soviet Union closed, and a public struggle began for the right of the Jews to immigrate to Israel and the release of Prisoners of Zion.

In the course of the term of the eighth Knesset there was a large number of terrorist attacks, including the attacks at Ma'alot (26 persons were killed - of whom 22 were youths), Nahariya, Kibbutz Shamir, Kirat Shmona, the Savoy hotel in Tel Aviv, Kikar Zion in Jerusalem, Beit She'an and Ramat Magshimim.

In July 1976 there was also the hijacking of the Air France plane to Uganda, and the IDF's daring operation to release the hostages from Entebbe. In the course of the term of the Knesset the issue of talks between Israelis and representatives of the PLO came up for debate several times.

In 1975 A Commission of Inquiry on the Status of Woman was appointed, headed by MK Ora Namir which marked the beginning of a change in the approach to the issue. In this year a civil war broke out in Lebanon, and the "Good Fence" was opened on the Israeli-Lebanese border. In March there were the events of Land Day, against the background of land confiscations in the Arab sector, in the course of which six Israeli Arabs were killed by the security forces.

As a result there was a wave of unrest amongst the Israeli Arabs. In these years there were several affairs, involving senior politicians in the Alignment, against the background of suspicions of financial irregularities. The candidate for the Governor of the Bank of Israel, Asher Yadlin, was brought to trial at the end of 1976, and Minister of Construction and Housing, Avraham Ofer, committed suicide against asimilar background.

Prime Minister Yitzhak Rabin resigned his post against the background of a bank account held by his wife in the US. The historical alliance between the Labor Party and the National Religious Party came to an end towards the end of the term of the eighth Knesset, against an ideological background, but the excuse was the allegation that a ceremony held at an airforce base, upon the arrival of F-15 planes from the US, caused a breach of the Sabbath.

These were also the years in which there were frequent strikes in El-Al and the port of Ashdod. In the course of the eighth Knesset there were also early attempts by the Government to enact two central basic laws: BasicLaw: Legislation and Basic Law: Human Rights, but both efforts were cut short due to the opposition of the religious parties.