The Oslo II Accords mandated that Israel withdraw its troops from Hebron, a city that posed unique challenges compared to other Palestinian cities. Hebron is home to an important Jewish religious site and a small yet significant Jewish community, which made the negotiations particularly complex. Despite his opposition to the Oslo Accords, Prime Minister Netanyahu recognized that he had no alternative but to proceed with the negotiations. Although he initially delayed the process, he ultimately continued with the talks.

On December 25, 1996, a confidential meeting took place between Prime Minister Benjamin Netanyahu and Palestinian leader Yasir Arafat. Lasting three hours, this intense and serious discussion took place at an Israeli base near the Gaza Strip border. Unlike their initial formal meeting in September, this encounter brought the long-anticipated agreement on an Israeli withdrawal from Hebron closer to fruition. The secrecy of the negotiations was highlighted by Netanyahu's covert arrival in an ambulance in the middle of the night. This meeting, along with further encouragement from American negotiators, ultimately led Netanyahu and Arafat to reach an agreement.

Signed on January 15, 1997, the Hebron Protocol established guidelines for the redeployment of Israeli military forces from parts of Hebron and divided the city into two sectors. Under this agreement, approximately 80% of the city (H1 Sector) was placed under Palestinian control, while the remaining 20% (H2 Sector) remained under Israeli authority to ensure the safety of Jewish settlers. The protocol further outlined security measures, management of civilian affairs, and provisions to facilitate freedom of movement within the city.

For Netanyahu, this agreement represented a significant milestone—it was the first time a Likud Prime Minister had relinquished control over any part of what was considered the Land of Israel. Despite his reservations about Arafat, Netanyahu felt compelled to accept the terms. He successfully negotiated an agreement that allowed Jewish residents in central Hebron to remain in place, securing 20% of the city for the Jewish district, even though Jews constituted only 3% of the population.

While the Hebron Protocol received broad support and passed in the Knesset with an 87-17 vote, it faced considerable opposition from within Netanyahu's own party. The agreement was a contentious issue for many Likud members, with former Prime Minister Shamir expressing strong disapproval, stating that “anyone who voted for Netanyahu should be tearing his hair out.” This internal party conflict highlighted Netanyahu's challenging balancing act in pursuing peace negotiations while maintaining support from his political base.