The establishment of the State of Israel in 1948, the Nakba (catastrophe) for Arabs, and the aggression by five well-armed Arab countries, assisting local Arab gangs and militias who had been attacking Jews for years, placed Jews in Israel and the state in mortal danger.
Fighting back, Israel eventually negotiated an armistice in 1949 that allowed it respite from open war, albeit not terrorism, and without peace. The Egyptians occupied the Gaza Strip; the Jordanians occupied Judea, Samaria, and the eastern part of Jerusalem, including the Old City and Temple Mount; Syria continued to occupy the Golan Heights, from which it constantly shelled Israeli settlements; all trained and supplied terrorists who raided Israel. The UN did nothing.
Arabs who left homes and property in Israel, and many from other countries who joined Arab armies and did not want to return, remained in Lebanon, Syria, and Jordan, most as “refugees” under the care of UNRWA.
This heterogeneous population was called “Arab refugees,” not “Palestinians,” because at the time there was no such group or people.
One reason they were called “Arab refugees” was that there were a lot of other refugees in Palestine who were Jewish. Hundreds of thousands of Jewish refugees from Arab countries streamed into Israel. UNRWA offered no aid, although Jewish refugees had lost everything and the newly established state had few resources.
It took a crafty Egyptian, Yasser Arafat, to create the PLO with his friends to promote the destruction of Israel and the return of Arab refugees. Arab countries saw them as convenient proxies in their war against Israel, to “liberate Palestine.”
Except for Jordan, no Arab host country permitted the newcomers to obtain citizenship; as temporary residents, their civil and humanitarian rights were harshly restricted.
The designation “Palestinian” did not become widely accepted until after the war in 1967, in which Israel, in self-defense, captured areas that had been assigned to a Jewish state by the League of Nations and Mandate, and then occupied by Arab countries: Judea, Samaria, and eastern Jerusalem; the Gaza Strip and Golan Heights, rich in Jewish history and archeology; and the Sinai Peninsula.
As the PLO launched mega-terrorist attacks around the world, “Palestinianism” became accepted, backed by the Arab League, Muslim and “non-aligned” countries, and the United Nations.