Using the concept of the carceral state, this article articulates how Israel’s control of the West Bank and the Gaza Strip has shifted to a nondemocratic one-state paradigm. While, initially, Israel operated a separate military carceral system for these areas, between 2000 and 2006 it dismantled the military system, transferred most Palestinian prisoners into Israel, and rebranded its civilian prison service as the National Prison Authority, making it the sole agency responsible for the incarceration of Palestinians. This reorganization consolidated a single carceral system inside Israeli territory—the one carceral state— which serves as crucial evidence of the de facto one-state paradigm and forms a centerpiece of this new regime in Israel/Palestine. By analyzing a broad range of archival and administrative documents and 168 Supreme Court decisions on the management of prisons and Palestinian prisoners, this study reveals how the massive “exclusionary inclusion” of the Palestinian prisoner population in Israeli state law and its administrative mechanisms changes the entire landscape of the Israeli settler-colonial citizenship regime. Palestinian prisoners become “carceral citizens” of the “one state” and are subject to a parallel, alternate legality, in which they expand their repertoire of resistance against the wider racialized and repressive regime across Palestine/Israel.