Part I: Background
. Part II: The Beginning; Egypt
. Part III: Syria and Jordan
. Part IV: Aftermath and Consequences
After the United Nations ceasefire was imposed, the bureaucrats came in. Just as Israel suspected, the UN decided to leave the borders as they stood at the end of the war. This meant that Israel was now in control of Judea and Samaria (The West Bank, so called because it was the western bank of the Jordan river,) the Gaza strip, The Sinai Peninsula, and the Golan Heights. In the immediate aftermath of the war, Israel attempted to enter into peace negotiations with the surrounding Arab states, and even the various Palestinian factions that existed at the time (mostly displace persons groups and terrorist organizations.) In light of the views of Israel during the war, it is unsurprising that the prevailing Israeli view of the situation was split between those who though that the land should be traded for security as soon as possible, and those who insisted that they needed to establish outposts and settlements.
By the second day of the war, however, the United States government, specifically the president, Lyndon Johnson, had formulated the land for peace approach, and decided to pursue it as the United States' strategy for peace in the Middle East, despite the unresolved war. In fact, it mirrored the analysis of most of the world's diplomacy experts, who assumed that the newly humbled Arab states would be happy to take back the land they lost in this humiliating defeat, in exchange for not bothering the 90-pound-weakling that just beat them up.
The surrounding Arabs states might have done so, except for the populations that they now had to pacify. After telling their people that the war was won and Israel was no longer extant, they had to retract their story and try to save as much face as they could. This strategy clearly did not include walking up to Israel with their figurative tail between their legs, asking for their land back. The dual approach of appeasing the people and trying to bow to international pressure was to have very significant deleterious effects in the partial re-emergence of Pan-Arabism in the 1980s, and future conflicts with Israel.
In Israel, the repercussions politically, in addition to furnishing a new generation of military hero-politicians to further complicate Israel's transformation into a true market economy democracy, were severe. A new interest group was to emerge, that of the settlers, a combination of the pre-state Agricultural Zionist movement, and the religous, in favor of occupying the biblical land of Israel. This unholy alliance was to prove the most complicated single issue in Israeli-Arab politics for the next 25 years. Those opposed to settlement were quickly pushed to the side in a wave of patriotism in the wake of 1967, to re-emerge as it became more obvious that the victory would not be a panacea to all of the internation conflicts over Israel. In addition to this, there was the issue of what the status of historically (ie. pre-1948, or pre-1929 Arab riot) Jewish settlements in Israel, such as Hebron and the Jewish quarter (about 1/7 of the area) of the Old city of Jerusalem.
These two groups both had considerable sway in Israeli politics, and many laws were passed that would support each of the two groups. The important points that were established in this fashion were that settlers would be given very significant tax breaks, in addition to the already significant advantages to moving out into the countryside, where more land was available. In exchange, there were no settlements allowed in the Gaza strip, or in many parts of the West Bank near existing settlements, ie. between Nablus and Jerusalem and Hebron (specifically to allow a contiguous, viable Palestinian state.)
It would not have been surprising to see Israel split over such divisive issues, and until today, in many ways it is. The cohesive force that prevented much of the inter-Israeli dissention from erupting, however, were the other political issues arising from the war: state sponsored terrorism, and the PLO. The constant pressure that Israel endured forced the goverment to co-operate to some extent, and gave everyone issues even more important that the future of the state: it's present viability under seige. The stabilizing influence of this pressure cannot be overstated, and the ability of the country to withstand financial, political, and social disruptions is due largely to just this destabilizing force. It is very possible that the country would not have survived without it.
The existance of Israel as a military force, as a political body, and as the controversy that it seems always to be, all stem in large part from the 1967 war. Without exaggeration, it is probably more important in the creation of the modern state of Israel than the Civil war was for the United States during Reconstruction.