We're in a street in occupied Ramallah. A young Palestinian man is taking out his rubbish. An Israeli tank is parked nearby, its gun barrel pointed right at the man's head. As he walks to the bin and back, the tank turret tracks him in whirs and clanks, the barrel dipping when he steps off the pavement. The man is about to go inside when his phone rings. He starts talking to a friend about a party, pacing back and forth, ignoring the tank, which is still noisily following his every move. When he goes back inside, the gun swivels to point directly at the camera.

This is a scene from Elia Suleiman's latest film, The Time That Remains, and it encapsulates the director's keen eye for the absurdities of Palestinian life – last seen in his Divine Intervention, which won the jury prize at Cannes in 2002. Rather than make politicised portrayals of his people's trauma, Suleiman offers something closer to silent comedy: his films are collections of stylised episodes, precisely framed and choreographed, often including himself as a character, usually a mute, impassive spectator.

In real life, he's the opposite: animated, voluble, passionate – a rather chic 49-year-old. Although Suleiman aims to be more of an observer, The Time That Remains is possibly his most inflammatory film yet. Like Divine Intervention, it's a collection of sketches, this time based on his own family history. Taking the 1948 Arab-Israeli war as its starting point, the film follows Suleiman's late father's resistance activities, defending what was then Palestine against the Haganah, the Jewish paramilitary group that would soon defeat them and declare the independent state of Israel. We see scenes of combat, of Jewish soldiers looting and occupying Palestinian homes, taking prisoners, carrying out executions, murdering innocents. Such incidents have never before been depicted in a major film.

"I heard these stories from my father," Suleiman says. "When he fell sick, I asked him to write them down. But I didn't think I was mature enough to handle them: it's a thin rope to walk along without falling into all kinds of aesthetic and political traps."

He also gathered evidence from his mother's letters and the recollections of friends. Then, when he came to shoot the film, in the actual homes where his family once lived, the older residents of Nazareth added more details. The scene of Israeli soldiers looting, for example, was based on the testimony of a woman from whose balcony they were filming. "She showed me bullet holes in her house," Suleiman says. "She had brought stuff from Beirut on her honeymoon, and then the Haganah arrived and started to take it. I said, 'I'm gonna take revenge for you.'"

Over the rest of the film's 60-year storyline, we see Suleiman's young alter ego singing patriotic Zionist songs at school, being told off for calling America "colonialist", and fleeing the country after being charged with tearing an Israeli flag. Then the grown-up Suleiman, played by himself, returns to present-day Nazareth and the West Bank to find those clear-cut polarities and identities of 1948 have blurred into a more confused, globalised landscape. So is the film autobiography, documentary or fiction? "I refuse linear histories," he says. "I depart from a certain grounding of truth into an aesthetic dimension."

The tank episode is based on a true story. "A guy in Ramallah told me a tank parked outside his house during the second intifada and followed him down the street. I told him, 'You're going to act that scene.' It's the same guy. I added the phone – a little bit of burlesque."

The tank is becoming something of a trademark. In Divine Intervention, there's a moment where the director throws a peach stone out of the window while driving past a tank and the tank explodes. The idea came to him, he says, while driving past a tank one day. He pulled over and jotted it down. "I never start from the position of what the film is about," he says. "I spend time wandering around and staring, going through certain accidents that produce a tickle or potential static, which I write in my notebooks."

When The Time That Remains was released in Israel, one politician attempted to have Suleiman declared an enemy of the state and have his (Israeli) passport taken away. But others leapt to his defence. "A lot of people don't want to talk about 1948," he says. "But some are willing to take the pain of what happened – and not just accept some kind of dream sequence of the creation of the Israeli state, which is a nonsensical story. It's a big lie."

One might also detect this change in recent Israeli cinema. In 2007, there was the liberal-minded Beaufort, in which Israeli soldiers questioned their futile occupation of a fort in Lebanon. Waltz With Bashir, in 2008, successfully excavated a former soldier's repressed memories of massacre. This year saw Lebanon, a thriller set inside an Israeli tank, featuring its terrified crew.

Suleiman thinks this shift echoes Hollywood's post-Vietnam war movies, in that these stories all emerge from a very particular point of view. "We are only talking about the psychology of the white soldier," he says. "We are not talking about the masses he is slaying – we are talking about him when he cries." The descendants of Lebanon's terrified soldiers could well be inside the tank in The Time That Remains, observing the Palestinians outside getting on with life, the two sides locked in a seemingly endless rhythm.

Although full of regret and compassion, Suleiman's films are not despairing. "You think I sit at home and think about the conflict?" he says. "I think about it existentially, about how we could procure togetherness. I don't think despair is necessary – otherwise I wouldn't be making films. If I stop, you can conclude that I gave into despair."