Unlike in pretty much all other countries in the World, Israel separates Nationality from Citizenship and there are more rights on the latter than on the former.

Further, uniquelly in the World Israel has different kinds of Citizenship such as Israeli Jew Citizienship and Israeli Arab Citizenship and the former has more rights than the latter.

As with every other piece of hasbara propaganda, those massive bollocks you're parroting are a meaningless façade for external consumption that hides the reality of a State were Apartheid is so deeply entrenched that by law non-Jews have a second class kind of citizenship with less rights than Jews who have a different class of citizenship.

They're both said to be Israelis (as there is but one nationality) and if one ignores all the rest they're both as you say "Israel's citizens", they're just de jure different kinds of Iraeli citiziens with different rights and, as I said in the beginning, most rights there are linked to Citizenship, not Nationality, so for example Israeli Arab Citizens can be denied the right to live in certain places whilst Israeli Jew Citizens cannot.

And to preempt the usual hasbara response to this disclosure: those Arabs don't live there because it's such a great situation, they still live there even though they are second class citizens because they've always lived there as they were born there on what was their family's land before it was stollen from them.

Israel's own law states that it is an ethnostate. One of it's foundational laws reads:

1.  The State of Israel

a) Israel is the historical homeland of the Jewish people in which the state of Israel was established.

b) The state of Israel is the nation-state of the Jewish people, in which it actualizes its natural, religious, and historical right for self-determination.

c) The actualization of the right of national self-determination in the state of Israel is unique to the Jewish people.

...

7. The state views Jewish settlement as a national value and will labor to encourage and promote its establishment and development.

Furthermore, two million Palestinians live within pre-1967 Israel borders with the ability to vote. Three million Palestinians live under military occupation in the West Bank. Two million Palestinians survive in what was an open air prison and now is one big death camp. All Jews, including those in the West Bank, enjoy full rights.

More details of the racial inequities:

Arab families are greatly over-represented among Israel’s poor: over half of Arab families in Israel are classified as poor, compared to an average poverty rate of one-fifth among all families in Israel. Arab towns and villages are heavily over-represented in the lowest socio-economic rankings, and the unrecognized Arab Bedouin villages in the Naqab are the poorest communities in the state

Direct state policy measures to reduce poverty disproportionately target Jewish citizens, with the result that poverty rates have fallen far more sharply among Jewish citizens than among their Arab counterparts, and inequalities have consequently persisted.

Admissions committees operate in around 700 agricultural and community towns and filter out Arab applicants, on the basis of their “social unsuitability”, from future residency in these towns. The operation of admissions committees contributes to the institutionalization of racially- segregated towns and villages throughout the state and perpetuates unequal access to the land.

The Jewish National Fund (JNF)—a body with quasi-state authority that operates solely for the interests of the Jewish people and controls 13% of the land in the state—continues to wield decisive influence over land policy in Israel, having been allocated six of a total of 13 members of the newly-established Land Authority Council.

Arab towns and villages in Israel suffer from severe overcrowding, with Arab municipalities exercising jurisdiction over only 2.5% of the total area of the state. Since 1948, the State of Israel has established approximately 600 Jewish municipalities, whereas no new Arab village, town or city has ever been built.

Israel is currently intensifying its efforts to forcibly evacuate the unrecognized villages in the Naqab (referred to as “illegal clusters”), including by demolishing entire villages, as recently witnessed in the repeated demolition of the village of Al-Araqib. In pursuing this policy, the state has rejected the option of affording recognition to these villages, many of which predate the establishment of Israel. Between 75,000 and 90,000 Arab Bedouin live in the unrecognized villages in the Naqab, whom the state characterizes as “trespassers on state land”.

State funding to Arab schools in Israel falls far behind that provided to Jewish schools. According to official state data published in 2004, the state provides three times as much funding to Jewish students as to Arab pupils. This underfunding is reflected in many areas, including relatively large class sizes and poor infrastructure and facilities.

A series of Israeli laws institute a range of restrictions on freedom of movement, freedom of speech, and access to the political system, including ideological limitations on the platforms of political parties and severe restrictions on travel by MKs to Arab states classified as “enemy states”. Such laws are used predominantly to curb the political freedoms of Palestinian citizens and their elected representatives and are steadily shrinking the space for political action available to them

And there it is. From "israel wasn't always trying to steal land" turns into "well israel not really an Apartheid state".

Three comments further and I'm going to read about how there are no innocents in Gaza.