Israel's cabinet has approved a bill to anchor in law the country's status as the nation-state of the Jewish people, in a move that has put the coalition headed by Prime Minister Benjamin Netanyahu under intense strain.

The decision yesterday saw the cabinet split between centrist ministers and right-wing and ultranationalist cabinet members, who outvoted them 15 to seven to approve three versions of the bill likely to be merged later.

Leader of the centrist Yesh Atid party Yair Lapid said: "The bill submitted today to the government puts a Jewish state before democracy...It is an anti-democratic bill. Neither I nor Yesh Atid will vote on Wednesday for the nation-state bill as it was submitted."

Justice minister Tzipi Livni said that neither she nor Lapid would support the bills. If they oppose them, Netanyahu is likely to dismiss them because it would be expressing a lack of confidence in a decision of the government to which they belong.

The legislation will go to the Knesset on Wednesday for preliminary ratification, but its final wording has not been settled. Israel's attorney general has cautioned against giving Jewish values, based on religion and history, prominence over democratic principles in law-making and judicial rulings.

Palestinians had rejected Netanyahu's demand they recognise Israel as a Jewish state, voicing concern that could deny Palestinian refugees a claimed right of return to homes they left or were forced to flee during Israeli-Arab wars.

Legislators from the country's Arab minority have described the bill as racist, noting that at least one version of the proposed law would leave Hebrew as Israel's only official language - and demote Arabic to "special status".

Netanyahu has submitted his own wording for the law, listing 14 principles that include declaring that "the State of Israel is democratic and founded on the principles of liberty, justice and peace in accordance with the visions of the Prophets of Israel".

The Israeli leader's draft, which was released to the media, pledges to "uphold the individual rights of all of Israel's citizens", but also says that only the Jewish people have a right of self-determination in the State of Israel.

The phrasing appears to rule out any binational state with the Palestinians, but makes no reference to the independent country they seek in the Gaza Strip and the occupied West Bank and East Jerusalem in a stalled, US-brokered peace process.

Jeremy Moodey, chief executive of Embrace the Middle East, told Christian Today that the legislation would only be making explicit elements of the Israeli political system that were already in place, such as a right of return for Jewish people on the basis of their ethnicity, but not for Palestinians who have an equal or greater connection to the land. "This is a logical consequence of the Zionist project which brings into focus the fundamental contradictions between ethnocracy and democracy," he said.

(Additional reporting by Reuters)