A draft of the controversial National State law has been passed by the Israeli cabinet and in a preliminary reading in the Knesset.

The bill declares that Israel is “the national home of the Jewish people”, who collectively have a “unique” right to self-determination in the land.

Among other things, the new law will give Arabic — currently an official language alongside Hebrew — “special status” and allow communities to exclude potential residents based on “religion or national origin”.

The draft voted on by the cabinet’s legislative committee on Sunday is a toned-down version of the original law, which emphasised the supremacy of Israel’s Jewish character over its democratic principles.

Prime Minister Benjamin Netanyahu has publicly supported the law and it is seen by many in the government as an attempt to “compensate” the right wing of his coalition over the government’s decision last month to limit settlement building in the West Bank.

The law has come under fierce criticism. The influential Israel Democracy Institute sent the cabinet a critical review of the bill, calling on the ministers not to vote for a law that could upset the balance between Israel’s Jewish and democratic fundamentals.

Meretz Leader Zehava Galon said that the bill was “a declaration of war against Israel’s Arab citizens”. She added it came “at the expense of Israel’s democratic identity” and was superfluous as the Declaration of Independence already enshrines Israel’s Jewish identity.

US-Jewish organisations the ADL and J Street also criticised the law saying that it harmed Israel’s “diversity” and marginalises its Arab citizens.

Like many other controversial laws proposed during the last few years by members of the Netanyahu coalition, the Nation State bill is also very far from becoming law.

Following its first reading in the Knesset, the bill will pass to the parliamentary committee stage, and then on to final readings. This process is expected to take at least a couple of months.

Amir Fuchs, a researcher at the Israeli Democracy Institute, commented: "Contrary to some media reports in the Israeli media, I don’t agree that it is a softer version, not at all. There were softer versions in the past.

"This is one of the worst versions – not the worst - but has all the major problems associated with the nation state bills of the past."

He added, however, that it is still unclear what the final version will look like.

He said: "Normally the Orthodox oppose basic laws, especially on the issue of nationality, so I am not sure they will support it in the coalition. Plus the Kulanu party generally oppose laws that change the constitutional structure."

On that basis, he said, "I think was an important decision today, but not that dramatic. The bill may well be buried in the future."