JERUSALEM, July 22 (Reuters) - Israel will remove from school textbooks an Arabic term that describes the 1948 creation of the Jewish state as a "catastrophe", the Education Ministry said on Wednesday.

Prime Minister Benjamin Netanyahu said when he was opposition leader two years ago the word "nakba" in Israeli Arab schools was tantamount to spreading propaganda against Israel.

The term, which is not part of the curriculum in schools in Jewish communities, was introduced into a book for use in Arab schools in 2007 when the Education Ministry was run by Yuli Tamir of the centre-left Labour party.

The book was aimed at children, aged 8 and 9.

Arab citizens make up about a fifth of Israel's population of seven million. The term nakba is used by Palestinians to describe the founding of Israel in a war when some 700,000 Palestinians fled or were expelled from their homes.

"After studying the matter with education experts it was decided that the term nakba should be removed. It is inconceivable that in Israel we would talk about the establishment of the state as a catastrophe," said Yisrael Twito, a spokesman for Education Minister Gideon Saar.

A passage in the textbook, describing the 1948 Middle East war at the time of Israel's creation, said: "The Arabs call the war the nakba -- a war of catastrophe, loss and humiliation -- and the Jews call it the Independence War."

Jafar Farrah, director of Mossawa, an Israeli-Arab advocacy group, said the decision to remove the term only "complicated the conflict". He called it an attempt to distort the truth and seek confrontation with the country's Arab population. (Additional reporting by Allyn Fisher-Ilan; Writing by Ori Lewis; Editing by Jon Hemming)