The Central Elections Committee rejected on Tuesday a request brought forward by Likud and NRP-NU, to cancel the Ra'am-Ta'al party list.
The petition was rejected by 18 votes to 16.
The two parties claimed that MK Sheikh Ibrahim Sarsur made comments calling for Islamic rule in Israel and declaring his support for Hamas.
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Ra'am-Ta'al MK Ahmed Tibi said that right-wing extremists, out of hostility towards Arabs and Muslims, had petitioned the committee in order to prevent true representation of the Arab sector.
Head of the right-wing extremist Jewish National Front group Baruch Marzel was expelled from the hearing after he hurled abuse at the representative of the attorney general. "You said that she was a representative of the Arabs, not of the state attorney," he burst.
After he was thrown out he told reporters that the ruling was a "political decision made by a political judge," referring to head of the Central Elections Committee, Supreme Court Justice Dorit Beinisch. He added that the Arab party undermined the democratic Jewish state.
Beinish said, "The invalidation of a party list was one of the hardest and most sensitive issues to be brought to the committee."
Attorney-General Menachem Mazuz had previously declared his opposition to the cancellation of the list.
Ra'am, made up of the Islamic Movement's southern faction and the Mada party of Beduin MK Taleb a-Sanaa, joined forces with MK Ahmed Tibi's Ta'al party to form Ra'am-Ta'al. Sheikh Ibrahim Sarsur got the first place on the party list, followed by Tibi, then a-Sanaa.
The worry amongst Israeli MKs was that if the statements were made by Sarsur and they indeed represented the opinions of the party and its voters, the inevitable conclusion would be that a large number of Israeli Arabs actively or tacitly supported destroying the Jewish nature of the state.
Arab parties have been predicted to collect between eight and nine seats in the next Knesset, representing roughly two-thirds of the Arab electorate. Part of the remaining Arab population tends to boycott polls at the behest of the Islamic Movement.