This paper examines the colonial paternalistic system during the first decade of Israeli military rule in the West Bank and Gaza Strip, along with its legal and financial framework and forms of resistance. Drawing on new archival material from sessions of the Israeli ministries’ directors–general committee and records of Israeli military orders, in addition to interviews, the article illustrates how the Israeli social welfare system aimed to cement policies of control, regulation, and exploitation of the Palestinian population. This included forcing Palestinians to financial transactions and purchasing Israeli subsidized goods from the Israeli market, while simultaneously portraying itself as a caring guardian of their interests. The study helps enrich the theoretical debate on the concept of settler colonialism in Palestine.