With no end to the stalemate in the peace process in sight, 1999 began with the discouraging news that over 20 percent of all land to be marketed by the Israeli Housing Ministry during the year was located in the Palestinian Territories. By mid-January, the PLC was in the headlines as well: First, former Israeli Prime Minister Shimon Peres became the first Israeli official to address Palestinian lawmakers. Second, the PLC articulated demands for an end to political arrests and the release of prisoners held in Palestinian jails without charge. Soon after, Hamas and Islamic Jihad prisoners began a hunger strike protesting their political detention. On 23 January, Palestine officially received its own telephone country code, 970, from the International Telecommunications Union. Meanwhile, in Jordan, an ailing King Hussein signed a royal decree shifting succession of the Hashemite throne from his brother, Prince Hassan, crown prince for the last 34 years, to his eldest son Abdullah.

The first day of February saw a triple tragedy when a car chase in Rafah killed a colonel from the Preventive Security Services and also cost the lives of two children who were run over. On 5 February, donor countries committed $770 million in an aid package to Palestine for 1999. A few days later, on 8 February, regional and world leaders converged in Amman for the funeral of King Hussein, who had died the day before; his son Abdullah was crowned the new monarch. Meanwhile, Israeli settlers were busy establishing new settlements in the West Bank and hastily fortifying up existing ones.

In March, discussion of the possibility of a unilateral declaration of a Palestinian state at the end of the official interim period – 4 May 1999 - intensified as the US Senate voted to oppose such a move. A few weeks later, a report by Peace Now caused much uproar, revealing that settlement-building initiatives in the Palestinian Territories had jumped 105 percent in 1998, while construction within the Green Line had declined 20 percent. At the close of the Berlin European Council on 26 March, the Heads of State and Government of the EU issued a landmark declaration reaffirming their "support for a negotiated settlement in the Middle East" that reflects "the principles of ‘land for peace’ and ensure[s] the security both collective and individual of the Israeli and Palestinian peoples." It further reaffirmed the "continuing and unqualified Palestinian right to self-determination including the option of a state". While Palestinians, Jordan, Egypt, Syria and the Arab League hailed the EU’s declaration, Israel rejected it as an unacceptable ‘dictate’.

In April, international media attention turned to Nazareth and the violence that erupted between Muslims and Christians in a dispute over a piece of land near the Church of the Annunciation. The Christian mayor, backed by the Israeli Government, wanted to build a plaza on the site of a demolished school building in time for the millennium celebrations. Muslims claimed the land belonged to the Islamic Waqf as the grave of Shihab Ad-Din and wanted to erect a mosque on the site. On 11 April, Palestinians were outraged when Labor candidate Ehud Barak announced his party’s four ‘red lines’ for any future final status agreement: Jerusalem undivided as Israel's capital; no withdrawal to the June 1967 borders; no foreign army west of the Jordan River; most settlers to remain in large territorial blocs under Israeli sovereignty. In the last week of April, the Palestinians had reason to cheer as the UN Commission on Human Rights in Geneva adopted two resolutions, one condemning Israeli activities in the Occupied Territories as against the principles of the peace process and the other acknowledging the right of Palestinian self-determination and reaffirming the right of return for Palestinian refugees. As the expiry date of the Oslo interim period drew near, on 25 April all eight PLO factions called on President Arafat to resist international pressure to put off the declaration of an independent Palestinian state; the Likud government threatened to cancel the Oslo Accords in the event of a unilateral proclamation. Despite Arafat’s efforts travelling around the world in search of support, on 30 April the PLO Central Council decided to postpone a declaration of statehood until after the Israeli elections. The 4th of May passed almost unnoticed.

The main event of May was the Israeli elections that returned the Labor party to power. Ehud Barak replaced a defeated Binyamin Netanyahu as the new Israeli Prime Minister. On 3 June, thousands of Palestinian demonstrators took to the street following a call by the Palestinian Authority (PA) to mark a ‘Day of Rage’ against Israeli settlements and land confiscation. The event turned violent when Israeli forces began firing on the demonstrators, causing injuries and one death. Later that month, on 20 June, the G-8 leaders called on Israel and the Palestinians to immediately and fully implement the Wye River Agreement and to stop any activities that might preempt the results of final status negotiations. A day later, Palestinians proudly watched President Arafat officially launch Palestine’s international dialing code 970 and unveil the first cellular telephone service dedicated to the Palestinian territories (known as Al-Jawwal).

On 23 July, King Hassan II of Morocco died at the age of 70 and was succeeded by his son Mohammed. On 26 July, PLC Speaker Ahmed Qrei'a (Abu ‘Ala) visited the Knesset invited by Knesset Speaker Avraham Burg.

On 8 August, Palestinians welcomed Qatar's Emir Sheikh Hamad bin Khalifa Ath-Thani, the first Gulf monarch to visit the Palestinian territories. From 15-31 August, Palestinian national sport teams participated in the Pan-Arab Games in Amman, winning several medals. On 19 August, the longest held Palestinian detainee, Khalil Sa’di Ahmad Ar-Rai’ from Gaza, was released after 25 years of imprisonment in Israeli jails for leading a Fateh cell.

On 4 September, the world watched as Israeli PM Barak and PA President Arafat signed the revised Wye Accord at Sharm Esh-Sheikh, paving the way for talks on a permanent peace settlement. A day later, Israeli authorities released 199 Palestinian prisoners from Israeli jails as stipulated in the new agreement. On 6 September, the Israeli High Court in a landmark decision outlawed interrogation methods used by the Shin Bet, which had been denounced by human rights groups as torture for years. On 10 September Israel transferred 7% of West Bank land from Area C to Palestinian civil control, Area B, and on 13 September - the sixth anniversary of the signing of the Declaration of Principles - FM David Levy and Palestinian negotiator Mahmoud Abbas (Abu Mazen) formally launched the final status talks at a ceremony at Eretz checkpoint. A few days later, however, Israeli authorities sparked unrest and frustration among Palestinians when they announced the sealing off of thousands of dunums of fertile agricultural land affecting some 79 West Bank villages. The month ended with PFLP Deputy-Sec., Abu Ali Mustafa, returning to Palestine after 32 years in forced exile.

The first major event in October was a Israeli-Palestinian compromise agreement on the southern safe passage route, according to which Palestinians would apply to a Palestinian office for magnetic cards, and Israeli officials would handle the security-check for applicants; Israel vowed not to use the passage as a ‘trap’ to arrest travelling Palestinians. On 9 October a Jordanian delegation headed by Speaker of Parliament, Abdul Hadi Majali, got a taste of occupation when confronted by Jewish settlers and the Israeli army outside Al-Ibrahimi Mosque in Hebron. On 12 October, Bethlehem mayor Hanna Nasser and other Palestinian leaders strongly denounced Israeli plans underway to construct an Eretz-like checkpoint in Bethlehem, an issue that led to demonstrations and clashes with the Israeli army throughout the rest of the month. On 18 October, the long awaited opening of the southern safe passage from Eretz checkpoint to Tarkumiya near Hebron was witnessed with mixed feelings, as the first hundreds of Palestinians headed to visit relatives and places inaccessible to them for years. On 21 October, tragedy struck Hebron when a fire broke out in an unlicensed gas lighter factory, leaving 14 people dead and over 20 injured. The incident put a shadow over the more joyous event at the end of the month, which was the opening of Shuhada Street in its entirety to Palestinians for the first time since the Al-Ibrahimi Mosque massacre in February 1994.

November began with a meeting in Oslo between President Clinton, President Arafat and PM Barak, in which they discussed the possibility of holding a summit similar to Camp David in order to achieve the planned framework agreement scheduled for mid-February 2000. On 4 November, FIFA President Joseph Blatter began his visit to Palestine, during which he laid the cornerstone for the Gaza International Stadium and pledged funds to boost the Palestinian Football Federation. On 7 November, in response to a Hamas statement released the previous day threatening to attack Israeli targets if settlement activity did not stop, Ehud Barak announced his decision to expand settlements near Nablus tenfold and that UN Res. 242 did not apply to the Palestinian territories. Nevertheless, the Israeli and Palestinian negotiating teams - headed by Oded Eran and Yasser Abed Rabbo – met on 8 November at the Grand Park Hotel in Ramallah to start final status talks with the declared goal of forging a final peace agreement by September 2000. On 11 November, Suha Arafat sparked some diplomatic uproar by saying during a Gaza appearance with Hillary Clinton that Palestinians had been subjected to poisonous gas by Israeli forces for years. A few days later, on 15 November, the scheduled Israeli transfer of West Bank territory to Palestinian control was put on hold due to a dispute over the territory in question. The same day, Peace Now reported that construction tenders for 2,703 settlement housing units had been issued since the Barak government assumed power. On 18 November, German Bundestag Speaker Wolfgang Thierse’s visit to Hebron was disrupted by a group of settlers, who shouted at him to "show his Nazi face" at Shuhada Street. Four days later, new tension erupted in Nazareth as the cornerstone for the disputed mosque near the Church of the Annunciation was laid. In protest, Christian churches closed the Christian holy sites throughout the country for two days. Meanwhile, in Gaza Israeli forces demolished six houses in Khan Yunis Refugee Camp, causing harsh confrontations between the local residents and Israeli army. On 24 November, the UN General Assembly adopted a resolution supporting the right of Palestinians to use their natural resources. The month ended with much internal turmoil after a public statement titled ‘A Cry from the Homeland’ was released on 27 November, which was signed by 20 Palestinians, including eight PLC members, who criticized the "tyranny, corruption, humiliation and abuse of the Palestinian people" by the PA. The PA reacted by staging a campaign of arrests and house arrest orders against the signatories.

On 4 December, the Bethlehem 2000 celebrations officially opened. On 15 December, negotiations between Syria and Israel were launched at the White House in Washington, leaving the Palestinians with new fears about their own talks for a final settlement. On 17 December, the PLO Executive Committee convened to discuss holding a Palestinian Central Council meeting on the issue of declaring statehood in 2000. As before, the decision to declare statehood was postponed. On 22 December, the UN General Assembly gave the righteousness of the Palestinian cause yet another boost by adopting a resolution on "the permanent sovereignty of the Palestinian people in the occupied Palestinian lands, including Jerusalem, and the Arab residents in the Syrian Golan Heights over their natural resources". The year ended with huge Christmas festivities and millennium celebrations in Bethlehem.