Since its inauguration in 1994, the Palestinian Authority (PA) has taken responsibility over Palestinian economy and finance. The PA lifted all restrictions on the movement of capital and current payments. Although this has moved Palestinian economy from a heavily controlled economy to a market-based style, the liberalization process was not built on sound legal bases and thus created a legal vacuum. The PA has been working ever since to confirm the Palestinian free-market economy with the introduction of a new well-developed legal system consistent with international standards and norms. Therefore, the objectives of this article are to analyze the Palestinian liberalization process and its compatibility with international law obligations.