The Keren Kayemeth Le-Israel (Jewish National Fund, JNF) was founded at the Fifth Zionist Congress in Basel in 1901 with Theodore Herzl's support upon an earlier suggestion by Zvi Hermann Schapira to create an organization to buy and develop land in Palestine for Jewish settlement. The guiding principle was laid down by Prof. Hermann Schapira. Early land purchases were completed in Judea and the Lower Galilee. In 1909, the JNF supported the founders of Tel Aviv. The establishment of the “Olive Tree Fund” marked the beginning of Diaspora support of afforestation efforts. The Blue Box (pushke) has been part of the JNF since it’s inception. It represents the partnership between Israel and the Diaspora. From 1902 until the late 1940s, the JNF also relied up the sale of JNF stamps to raise monies. For a brief period in May 1948, JNF stamps were actually used as postage stamps during the transition from Palestine to Israel.

The JNF received its first parcel of land, 200 Turkish dunams (18 hectares) east of Hadera, as a 1903 gift from the Russian Zionist leader Issac Leib Goldberg of Vilnius. It became an olive grove. In 1904 and 1905, the JNF purchased land plots near the Sea of Galilee and at Ben Shemen. In 1921, JNF land holdings reached 25,000 acres (100 km²), rising to 50,000 acres (200 km²) by 1927. At the end of 1935, JNF held 89,500 acres (362 km²) of land housing 108 Jewish communities. In 1939, 10% of the Jewish population of the British Mandate of Palestine lived on JNF land. JNF holdings by the end of the British Mandate period amounted to 936 km. From the beginning, JNF's policy was to lease land long-term rather than sell it.

After Israel's establishment in 1948, there was a debate concerning the future of the JNF. Initially the government wanted to dismantle it, but after the United Nations General Assembly passed Resolution 194 calling for Arab refugees to be allowed back into their homes, the JNF was seen as mechanism by which land which was previously owned by Arabs could be legally purchased by Jews. Accordingly, the government began to sell absentee lands to the JNF, left behind by former Arab owners. On January 27, 1949, 1,000 km² of this land (from a total of about 3,500 km²) was sold to the JNF for the price of 11 million pounds. Another 1,000 km of seized land was sold to the JNF in October, 1950. Over the years questions about the legitimacy of these transactions have been raised repeatedly; Israeli legislation has generally supported the JNF's land claims. In 1953, the JNF was dissolved and re-organized as an Israeli company without much essential change. A far greater change occurred in 1960, when administration of the land held by the JNF, apart from forested areas, was transferred to a newly formed government agency, the Israel Land Administration, the government agency responsible for managing 93% of the land of Israel. The JNF received the right to nominate 10 of the 22 directors of the ILA, lending it significant leverage within that state body.

The charter specifies that the purpose of the JNF is to purchase land for the settlement of Jews. In the past, this was interpreted to mean that JNF should not lease land to non-Jews, but the restriction was frequently circumvented in practice, for example, by granting one-year lease to Bedouins for pastures. In January 2005, Israel's Attorney General Menachem Mazuz ruled in response to a Supreme Court petition that lease restrictions violated Israeli anti-discrimination laws. In July 2007, the Israeli Knesset approved the Jewish National Fund Bill in its preliminary reading, which would authorize the JNF to resume the practice of refusing to lease land to Arab citizens. However, in September 2007, the High Court of Justice agreed to delay a ruling by at least four months. A temporary settlement was reached where the JNF is prevented from discriminating on grounds of ethnicity but, every time land is sold to a non-Jew, the ILA will compensate it with an equivalent amount of land; thus ensuring the total amount of land owned by Jewish Israelis remains the same. In June 2005, an agreement was made by which the JNF would transfer a portion of its urban holdings to the state and the state would transfer rural land in the Negev of equal value to the JNF.