An art exhibition in Jerusalem that gives Israelis the chance to experience a Palestinian family’s living room – by wearing virtual reality goggles – has laid bare the entrenched separation of two societies that live side by side but, increasingly, worlds apart.

The Israel Museum, where the exhibition is being held, is less than two miles from Arab neighbourhoods in Jerusalem where thousands of Palestinians live. And it is only six miles from the West Bank village where the family who agreed to be filmed for the project live.

“On the surface, the exhibition is not threatening, it’s almost even naive. But I think the under-layer is very tragic, disappointing,” the artist, Daniel Landau, said.

It is part of a exhibition in the museum’s youth wing that explores human encounters, with other works placing the spotlight on the impact of smartphones on relationships or interactions with strangers in the street.

Landau’s room, called “Visitors”, has been sliced down the middle, with one side decorated like the home of a Jewish family and the other as a Palestinian home. Virtual reality glasses give visitors a 360-degree view of the homes and they can listen to stories from family members.

More than 200,000 people have visited in the past three months, said Landau, who has often gone to hear feedback. “The initial response is that they say: ‘I’ve never been into an Arab house. I’ve never met Arab people. I’m surprised to see how family-like they are.’”

Israelis and Palestinians – societies that once knew each other intimately – have never been as physically divided as they are today. After two intifadas, Israeli military crackdowns and ensuing bloodshed, there have been moves for complete separation.

Israel has built a concrete barrier and barred most Palestinians from entering. It has banned its own citizens from entering Palestinian-controlled West Bank cities. Gaza, which is geographically disconnected from the West Bank, has been put under blockade and few can leave.

Even in Israel’s majority-Arab cities, and in Jerusalem, there is little interaction between neighbours. Palestinian anti-Israel boycott movements have gathered strength and among Israelis, “coexistence” is often considered a politically loaded and divisive term.

The virtual-reality experience. Photograph: Daniel Landau

The two families Landau filmed for the project live just tens of metres apart but have never met because they are separated by the wall that divides the West Bank. Landau said the Palestinian family had been granted special permits to travel into Israel to visit the museum this month.

Inspired by his experience of growing up in a Jewish Jerusalem area where he had a friend in a nearby Palestinian village, Landau had hoped to find families there for his project, but he said the situation was too tense.

“Sometimes it is too painful,” he said. “There are a lot of disputes. In the [Arab village of] Issawiya, there is running sewage in the streets, and there is land being taken for a botanical garden … There are too many open wounds.”

A large part of the work, Landau said, was to touch on internal rifts in Israeli society, namely its Jewish population from the Middle East and north Africa whose “Arabness” had been sidelined.

Mizrahi Jews were expelled from Arab countries or chose to immigrate to Israel after its creation. But they have long faced economic, cultural and political marginalisation from the Ashkenazi elite of European origin.

This had led to an “impossibility encapsulated in the Israeli society. This kind of love/hate. This kind of appreciation for the east but actually a sort of rejection.

“It’s the story of the Arab Jew. Half of us are very connected to Arab culture, language, music, mentally,” he said. “That’s what I wish we could bring – more empathy, accepting to the local culture. The potential of what could happen when we cooperate. Rather than bringing western values, consumer culture into this meeting point.”

Israelis and Palestinians have never been as physically divided as they are today. Photograph: Daniel Landau

Landau said he noticed that Mizrahi Jews who experienced the virtual reality homes had felt nostalgic. “They say: ‘That’s how my grandfather used to decorate his house, that’s how he used to talk about his kids.’”

Raji Sebteen, 55, the Palestinian man who had his home and family filmed for the project, said the exhibition was a “good way to ask others to believe in peace”.

“It’s a good feeling,” he said, when asked about the thousands of Israelis who had now seen inside his home.

“You have to understand that people are fearful. They are scared because of the situation … because of mistrust planted inside them, it is not easy,” he said, adding that any Israeli would be welcome to visit his home in real life.

Ido Harari, a 43-year-old Israeli academic visiting the museum with his young daughters, said hostility had grown between both sides and attempts to return to a pre-state situation where Arabs and Jews mingled was “a bit romantic”.

“I don’t know how much it is based on actual possibilities we have today. I have Arab acquaintances, not Arab friends, unfortunately. I don’t know if you would get invited,” he said.

“Me and my friends are on the left side of the left wing. We don’t think of ourselves as Zionists. Our goal is one state with Jews and Arabs living as equals together. Still, most of our friends, they are not close friends with Arabs.”

As his eight-year-old held the goggles up to her face, Harari said: “My daughter is really excited about this room. So it probably works.”