West Bank settlers entered the Arab city under the cover of an armed escort. As they proceeded, security forces chased Palestinian youth down alleys, firing tear gas, stun grenades and foam-covered bullets. Masked in keffiyahs, local high school students who had been striking against the settlers' provocations reorganised, throwing stones at the Israeli forces from behind makeshift barricades.

The scene was a familiar one. The barrage of tear gas canisters in the streets of Umm el Fahm looked almost the same as any number of clashes that are common in the West Bank. The main, crucial differences were that this one occurred inside Israel's 1948 borders and the target was Israel's Arab citizens.

Late last month, the ultra-nationalist settler leader Baruch Marzel turned his attention from terrorising West Bank Palestinians to inside Israel. He led a settler march intent on intimidating residents of Umm el Fahm, a city near Haifa, and condemning the leadership of the Northern Islamic Movement, which promotes an Islamic strand of Palestinian nationalism among Arabs Israelis.

The Palestinian-Israeli city has increasingly become a target for Mr Marzel to apply West Bank-style settler intimidation. A settler march through the city in March 2009 sparked riots and strikes, which the Israeli police heavily repressed.

But Mr Marzel and his Jewish National Front party are not acting in isolation. They are working in concert with the proposed loyalty oath legislation that targets non-Jews, rabbis in the Israeli city of Safed who have told residents to only rent apartments to Jews, and moves by the interior ministry and Shin Bet security service to revoke Israeli citizenship from those convicted of "loyalty related" offences.

With Gaza sealed away from Israelis' sight and the Palestinian Authority presiding over a relatively quiet West Bank, the driving sectors of Israel's expansion and segregation - the government, security establishment, religious leadership and settler movement - are all looking inward.

"Marzel is not alone. Maybe some Israeli politicians don't like his language, but they do agree with the notion that our citizenship is conditional - that we are either loyal to Zionism or we lose our citizenship," said Jamal Zahalka, the leader of the Palestinian-Israeli party Balad. "We demand our rights and there is an attack on our citizenship."

The tone and groundwork for Israel's shift towards targeting its Palestinian citizens was laid during 2009 parliamentary elections. At the same time the Israeli military pulverised the Gaza Strip, the election debate presented to Jewish Israelis focused on an existential crisis generated by internal disloyalty (ie, Palestinian citizens of Israel) combined with Israel's external enemies.

Now the rhetoric is being put into action. While the government pushes legislation that substitutes the rights of citizens for the privileges of religion, West Bank settlers are taking to Palestinian streets inside Israel. The result is a form of patchwork colonialism - both the state and settlers jump between continued expansion, repression and displacement in the West Bank and internal domination and segregation. The two-pronged push effectively erases the Green Line.

It is a reality not lost on Palestinian-Israelis who, despite their citizenship, are now seeing far fewer differences between their situation and Palestinians in the territories occupied in 1967. During the clashes in Umm el Fahm, youth carrying Palestinian flags could be seen running for cover while women on their balconies threw onions to the crowds in the streets as a remedy for tear gas in a groundswell of grassroots opposition.

"Five years ago you would not have seen this kind of mobilisation," said Samieh Jabbarin, a leading member of the leftist Palestinian-Israeli Abnaa el Balad (People of the Homeland Movement). Originally from Umm el Fahm and now an activist and actor in Jaffa, Mr Jabbarin spent nearly 10 months under house arrest after he was detained by riot police for his participation in the 2009 election day demonstrations against Marzel.

Although Palestinians inside the 1948 borders have long felt an ideological affinity with refugees and Palestinians in the Occupied Territories, Israel's divide-and-rule strategy had previously given its Arab citizens more privileges. As the self-proclaimed "Jewish state" puts more pressure on citizens it considers a demographic threat, Palestinian-Israelis are seeing fewer benefits to their passport. Their material situation is also growing increasingly similar to their peers on the other side of the Green Line.

As a result, it should not come as a surprise when Palestinian-Israelis resort to the same forms of resistance, as was recently seen in Umm el Fahm