Chapter 8 examines Israel’s regional foreign policy during the first Netanyahu government, in relation to three themes: the peace agreement with Jordan, relations with Syria, and relations with the Arab states in the Gulf. The chapter demonstrates that, during this period, Israel pursued a foreign policy of backtracking on engagement. The warm peace with Jordan became a cooler strategic peace. Relations with the Gulf countries were frozen and the Maghreb states all but severed their ties with Israel. Meanwhile, Syria and Israel were on the brink of war. The retraction from the foreign policy of engagement was entirely in line with the unmitigated hostility of the prime minister and his immediate circle towards the Arab world, and his clear preference for satisfying his core domestic political constituency over advancing the peace process. The chapter adds to the existing literature by exposing the divisions within Israel’s foreign policymakers, in government and the security network, amid the prime minister’s foreign policy of backtracking from engagement.