'If we don't divide the land we're heading to apartheid': Ex-head of Israel's Shin Bet

The former head of the Shin Bet intelligence agency and former commander of the Israeli navy pointed out that Israel is fighting simultaneously on five fronts: "in Iran, in Gaza in Lebanon, in the West Bank and in Syria".

"There is a limit to what we can achieve by the use of military power," Ayalon said, adding that he does not believe Israel has "the ability to end the war" in Iran without resorting to what he calls "smart power" – "a combination of military power and statesmanship or diplomacy."

'Most Israelis do not see Palestinians as a people'

Asked about the steps taken by the current Israeli government in the West Bank – including allowing the purchase of private land and expanding Israeli authority over Palestinian infrastructure – Ayalon said he "totally agreed" with the assessment that they amount to a march towards full annexation. "Most Israelis do not see Palestinians as a people," he noted, warning that the Israeli government intends "to annex all the West Bank and Gaza."

Ayalon argued that without the recognition of the Palestinian people, no lasting peace is possible: "Unless we shall be able to come to an agreement with the Palestinian people, we shall not be able to create stability in the Middle East."

"If we shall not divide this piece of land (between Israelis and Palestinians), we are heading to apartheid," he declared.

Read moreIsraeli strikes kill 10 in northern Gaza, including toddler, civil defence says

The former intelligence chief also sounded the alarm over a growing fracture between Israel and Jewish communities worldwide. "The rift that we are creating with the Jewish people everywhere in the diaspora" is overlooked in Israel, Ayalon said.

Most young Jewish people living abroad, he noted, "do not understand us" and "do not accept what they see" happening in Gaza and the West Bank.