Mossawa, a leading Arab-Israeli rights organization whose acronym means "equality" in Arabic, said 29 Arab citizens of the Jewish state had been killed by Israeli security forces since October 2000.
Thirteen of those were killing during October 2000 riots in solidarity with the Palestinian uprising that had begun a month earlier.
The Orr Commission, set up to investigate the shootings, criticized several senior police officials for firing live rounds at the unarmed demonstrators in its final September 2003 report, which also hit hard at Israeli discrimination of its Arab citizens, who make up around of fifth of the total population.
Mossawa slammed the government for having so far failed to implement the Orr Commission's recommendations.
"Hatred expressed by political leaders, physical attacks and racist incitement endanger the Arab community and the democratic character of the state," it also said.
The report said underdevelopment was "extreme" among Arab Israelis, and especially in unrecognized Bedouin villages which are disqualified from all municipal services, such as electricity, sewer systems and health facilities.
It said government ministries often allocate less than seven percent of their budget to Arab Israeli communities.
It also cited "insufficent support for the Arab educational system" which, in turn, has meant lower educational levels and an undertrained labor force that earns only 60 percent of the average Jewish salary.
Only six percent of that community work in government, the report said.
Mossawa also criticised what it called legal discrimination, starting with a July 2003 law banning Israeli Arabs from giving their Israeli nationality to a Palestinian spouse and their children.
The law was widely slammed by rights groups.
Mossawa said Arab Israeli women were doubly affected by gender and ethnic discrimination and suffered from violence, poor access to health, low educational subsidies and high rates of unemployment.
In its recommendations, the rights organization suggested Israel's Jewish community legally recognize Arab Israelis as "a distinct national minority," while relying on them to mediate with Palestinians.
Likewise, it called on Arab Israelis to take "an active role in the peace process" and exert community leadership.
The international community should include improving the status of Arab Israelis in any bilateral agreement with Israel, rely on that community in the peace process and secure special funding for its growing needs, the report said.
