While all eyes this week have been riveted to the Palestinian bid for recognition of statehood at the United Nations, a major change has occurred in Israel's internal political scene that may be of historic significance, with probable repercussions on the Israeli-Palestinian situation as well.

Last Wednesday, the members of Israel's Labor Party—the party that led the Zionist enterprise to statehood in 1948 and governed Israel, under David Ben-Gurion and his successors, until 1977—elected Shelly Yachimovich over Amir Peretz as party leader. It was the second time the party will be led by a woman; in 1969–1974 it was led by Golda Meir, Israel's prime minister during those years.

Labor has been in steady decline since Menachem Begin, the Likud leader, was elected premier in 1977, and in the last general elections, of 2009, under Ehud Barak's leadership, the party garnered only 13 seats in the 120-seat Knesset. (In the 1950s–1970s the party usually had 35–50 seats and led all the coalition governments.) The ostensibly leftist Barak then joined Binyamin Netanyahu's right-wing coalition government, serving, as he still does, as defense minister, but his party paid dearly for what many regarded as his betrayal of core values. Labor was sundered by a succession of internal splits and rebellions, with Barak himself bolting the Labor Party and establishing his own "Independence" faction in January 2011. Barak, with little parliamentary clout, remains Netanyahu's defense minister.

Last Wednesday's vote was in and between the Labor rump that remained. Yachimovich's rise has been nothing short of meteoric. Born in 1960, she spent most of her adult life as a radio journalist, earning a reputation as opinionated and critical of conventional wisdom and the establishment. She quit her job as a journalist and entered politics in 2005, entering the Knesset for the first time in the general elections the following year. She is divorced with two children.

She was a very active legislator, focusing on social and economic issues. While something of an intellectual—she has authored two novels—she comes from an Ashkenazi working-class background. Her father was a blue-collar construction worker. Her parents were Holocaust survivors.

Peretz won the Labor Party leadership in 2005 after beating Shimon Peres, a long-time Labor Party stalwart who is now Israel's president. Peretz served as defense minister in Ehud Olmert's coalition government during 2006–2007, when he was forced to resign against the backdrop of the failed war of 2006 against the Hezbollah in Lebanon. (He was famously caught on television looking through binoculars whose caps were still on, symbolizing his performance during that war.) He then lost the party leadership to Ehud Barak.

Yachimovich ran mainly on a "social" ticket, promising improvements in the country's social and economic systems for the benefit of the country's poor. On political issues, she is a moderate leftist. She is a strong supporter of a compromise with the Palestinians based on Israeli withdrawal from the West Bank in exchange for peace in a "two-states-for-two-peoples" formula. But she recently shocked left-wingers in Israel by implying in an interview that the settlers in the West Bank needed to be regarded empathetically, as it was Labor that had first sent them into that Arab-dominated territory and they were fulfilling a national mission. "I certainly do not see the settlement project as a sin or a crime," she said in the 18 August interview in the Israeli daily Haaretz.

Yachimovich beat Peretz, a blue-collar leader of Sephardi (Moroccan) birth, by a margin of 54 percent to 45 percent, not exactly a landslide victory by Israeli internal-elections stadards. She will have a rough time of it keeping the party together and beating back criticism and even leadership challenges in the coming years. The most critical question will be her ability to pose a serious challenge to Likud leader Netanyahu and the leaders of his aligned right-wing and religious parties in 2012–2013, when new general elections are due. She will need to ride, and mobilize, the recent mass movement for socio-economic reform that has swept Israel's cities. If she does this, she will also be able to pose a challenge to the incumbent Israeli right on the Palestinian issue and on the question of the Jewish state's relationship with the surrounding Arab world. Whether Yachimovich, untried in foreign and defense affairs, is up to the challenge is yet to be seen.