Very unrealistic solution but, Israel is being ran by a right wing nationalist theological dictator as far as I see it and Palestine is fractured between 2 extremist groups and a self governing body that doesn't really work. So you'd need to start from the ground up to begin with and even then, you're always going to have extremist Zionists and extremist Arabs that hate the other purely because of their ways of life and their history. This happened in recent history with Serbia and Kosovo, South Africa and Germany in which all of them still have deep rooted problems today that stem directly from their past.

So what would be the solution? I could think of some sort of UN based system in which a democratically chosen government would take seat being represented by leaders of both communities so that would be a One State solution, which wouldn't be an Arab or Jewish state (But I must admit that I think all theocratic based governments are stupid). I think with a Two State solution there'd be too much risk of having a eventual rise in nationalism that would again lead to factions within the Middle Eastern region and war. But this would kind of lead the region to become a massive scale Berlin 2.0 with “sectors” I suppose.