This article presents an alternative approach to the resolution of the Palestinian-Israeli conflict. As the one-state solution is generally unacceptable to both Israel and the Palestinians and the two-state solution does not seem to be working, the authors suggest a possible ‘second-best solution’. Under this proposal a prospective Palestinian state would extend from the Gaza Strip to adjacent parts of the Sinai Peninsula for which Egypt would receive either financial or territorial compensation by the extension of its territory westwards to areas currently administered by Libya.