Israel will never give up their sovereignty and they will never lose it.
There has never been a Palestinian nation in the history of the world. The word Palestinian comes from the name of a Roman province that included Israel, Syria and parts of Jordan, which would later become part of the Ottoman Empire.
Most of the Palestinians are from Jordan. The PLO was formed in Jordan as terrorist organization; they were kicked out of Jordan after the PLO tried to steal land in their dreams of establishing a Palestine state that included Israel, parts of Syria and parts of Jordan. It was parts of Jordan they first wanted to gain, because they wanted developed land. Like Israel, they tried to claim historical ties as the reason. Of course they failed.
When Iraq, Iran and other Middle Eastern countries turned their back on the PLOs, the PLO turned their eyes on Israel. Given the hatred other middle eastern countries had for Israel, they saw this as a good way to rid of Israel and to keep the Palestinians out of their own countries. The Palestinians had become pariahs in the Middle East after their habit of trying to take other peoples land.
With a series of attempted failed unprovoked invasions against Israel, many of the refugees from the wars ended up joining the PLO.
Before WWI, Israel was part of the Ottoman Empire for 400 years. After WWI and until WWII ended, it fell under British control in 1917, it was being administered by the Jewish people near the end. Eventually the UK turned over Israel to the Jews.
While some Palestinians are refugees who were expelled from Israel after a series of wars that were waged Israel, most of them are from Jordan and other parts of the Middle East.
There was very little interest in the lands Israel occupies prior to Israel becoming a state, a hybrid population of Jews, Christians and Muslims lived in the area.