For many years the Holy See recognized Israel de facto, but declined to open formal diplomatic relations. Historical and theological issues burdened mutual perceptions. Wishing to normalize the relationship, the Holy See and Israel concluded a Fundamental Agreement in 1993 and exchanged ambassadors. Under the terms of the accord, the parties were to negotiate further treaties on key issues of church and state. A Legal Personality Agreement was signed in 1997 but was never implemented; and another fiscal and property treaty is still being negotiated. The relationship itself, which is supposed to fulfil the promise of reconciliation between Catholics and Jews, has been ambivalent, and marked by recurrent controversy. This article surveys the issues currently under negotiation. It argues that the reasons for the reserve are structural and subjective, pointing to political, conceptual and institutional dissonances. However, the article also notes the steady progress recently made and expresses the hope that solutions can be found to contested matters.