Alon Hilu chooses his words with the sort of forensic care you would expect from a man whose day job is as an intellectual property lawyer. Even so, the Israeli writer never imagined the political storm he would unleash with his best-selling novel, The House of Rajani.

Hailed as one of his country's rising literary talents, Hilu came under fire when the book was first published in Hebrew two years ago — not because of its stylistic merits or otherwise but because of what some saw as its provocatively pro-Palestinian slant.

Condemned bluntly by another Israeli novelist as "anti-Zionist," it won the prestigious Sapir prize last summer, though it was quickly withdrawn amid accusations of bias by the judges. "I feel as if the author is using language as a weapon against us," complained one Jewish reader. "Disgusting," thundered another. "How low will you stoop?"

Hilu, now promoting the English translation of The House of Rajani, makes no apology for what he calls his "narrative of the other," which foreshadows the nakbah – the dispossession and flight of the Palestinians during Israel's 1948 war of independence.

"If I was a Palestinian author I'd try to explain the significance of the Holocaust, but since I am a Jew I write about the suffering of the Palestinians – without necessarily comparing the two," explains Hilu, 38. "Our history can be told in a different way."

Older Israeli writers such as AB Yehoshua, Amos Oz and David Grossman have tackled different aspects of the conflict. But Hilu goes right back to the beginnings of what he identifies as an unmistakably colonialist enterprise, framed by the encounter between a young Arab and a Jewish immigrant in the first years of Zionist settlement in Ottoman Palestine.

The year is 1895, the location Jaffa. The Polish-born hero – Isaac Luminsky – is a handsome agronomist who is sharply aware of the fertile soil of the promised land – and of the Arab peasants who till it. (In two years' time Theodor Herzl will convene the first Zionist congress in his native Vienna). Salah Rajani is a sensitive Muslim boy who lives with his beautiful mother in a dilapidated mansion surrounded by orange groves. Luminsky covets – and conquers – both the woman and the land.

Salah suffers from disturbing, apocalyptic visions about a disaster which is set to befall his people. He "sees" one man with a black eyepatch, another who is handsome and black-bearded, and a mannish woman, easily recognisable as Moshe Dayan, Herzl, and Golda Meir – Zionist and Israeli heroes who came to haunt the Palestinians. He sees a century or more into the future how the family estate has been stolen to build one of the icons of the modern Tel Aviv skyline, the glittering Azrieli Towers.

Edward Said's Orientalism has been invoked by some to deconstruct the book's themes of sexual and colonial domination. But it is the menacing shadow of future catastrophe – the unique experience of the Palestinian nakbah – that gives the story both its dramatic force and contemporary relevance: moves are under way in Israel to stop official funding for nakbah commemoration.

Politics apart, Hilu was widely praised for his recreation of an archaic Hebrew idiom in the early years of its revival from a language of liturgy to a spoken vernacular. The English translation has a Dickensian quality, and differs slightly from the original: Lubinsky is based on a real Jewish land agent whose litigious descendants disliked the negative way he was portrayed; Salah's "real" surname is that of a leading Palestinian family. A more striking omission is a map showing today's Tel Aviv, stripped back to the late 19th century sand dunes, Arab hamlets and orange groves that lie buried under the high-rise office blocks, hotels and parking lots of a 21st century metropolis, Israel's Manhattan-on-the-Med.

Hilu says his own taboo-breaking views were partly moulded by his background: parents who immigrated to Israel from Syria and who did not share the dominant Ashkenazi (European Jewish) experience, with its emphasis on the Holocaust, and with no affinity for Arab life, language and culture. He also sees a link to the work of Israel's "new" historians who have de-bunked the old "David versus Goliath" narrative in recent years. This extraordinary book is set in the distant past but forms part of a red-hot contemporary debate, in Israel and beyond, about the origins and meaning of the world's most intractable conflict.

Iconoclast he may be, but Hilu ponders carefully before answering his critics: "Zionism does have a colonialist character and Jews did behave in condescending ways towards Arabs," he says. "I am angry at our founding fathers for the damage that they did."

Yet there are limits to his critique: "I don't define myself as an anti-Zionist," he insists. "I believe that facing up to the Palestinian past of Tel Aviv and of the Land of Israel in general and awareness of the Palestinian narrative actually strengthens Zionism because that's the only way to make peace with the Palestinians and our other Arab neighbours."

The House of Rajani, by Alon Hilu, published by Harvill Secker, £12.99