To answer you, all what Israel wants is peace and to be left allone.The Arabs have been offered a state of their own many times, and each time the answer was negative.
The Palestinians are not Israeli, they chose it that way, the Arabs that wanted to be part of Israel are very happy in Israel and are full citizens and have the same rights as everyone else
The Palestinians have actually had numerous opportunities to create an independent state, but have repeatedly rejected the offers:
In 1937, the Peel Commission proposed the partition of Palestine and the creation of an Arab state.
In 1939, the British White Paper proposed the creation of an Arab state alone, but the Arabs rejected the plan.
In 1947, the UN would have created an even larger Arab state as part of its partition plan.
From 1948 to 1967, Israel did not control the West Bank. The Palestinians could have demanded an independent state from the Jordanians.
The 1979 Egypt-Israel peace negotiations offered the Palestinians autonomy, which would almost certainly have led to full independence.
The Oslo process that began in 1993 was leading toward the creation of a Palestinian state before the Palestinians violated their commitments and scuttled the agreements.
In 2000, Prime Minister Ehud Barak offered to create a Palestinian state, but Yasser Arafat rejected the deal.
A variety of reasons have been given for why the Palestinians have in Abba Eban's words, "never missed an opportunity to miss an opportunity." Historian Benny Morris has suggested that the Palestinians have religious, historical, and practical reasons for opposing an agreement with Israel. He says that "Arafat and his generation cannot give up the vision of the greater land of Israel for the Arabs. [This is true because] this is a holy land, Dar al-Islam [the world of Islam]. It was once in the hands of the Muslims, and it is inconceivable [to them] that infidels like us [the Israelis] would receive it." The Palestinians also believe that time is on their side. "They feel that demographics will defeat the Jews in one hundred or two hundred years, just like the Crusaders." The Palestinians also hope the Arabs will acquire nuclear weapons in the future that will allow them to defeat Israel. "Why should they accept a compromise that is perceived by them as unjust today?"