An academic backlash has erupted in Israel over proposed new laws, backed by the government of Binyamin Netanyahu, to criminalise a handful of Israeli professors who openly support a campaign against the continuing occupation of the West Bank.

The Boycott, Divestment and Sanctions (BDS) campaign against Israel has gained rapid international support since Israeli troops stormed a Gaza-bound flotilla of aid ships in May, killing nine activists. Israeli attention has focused on the small number of activists, particularly in the country's universities, who have openly supported an academic boycott of Israeli institutions.

A protest petition has been signed by 500 academics, including two former education ministers, following recent comments by Israel's education minister, Gideon Saar, that the government intends to take action against the boycott's supporters. A proposed bill introduced into the Israeli parliament – the Knesset – would outlaw boycotts and penalise their supporters. Individuals who initiated, encouraged or provided support or information for any boycott or divestment action would be made to pay damages to the companies affected. Foreign nationals involved in boycott activity would be banned from entering Israel for 10 years, and any "foreign state entity" engaged in such activity would be liable to pay damages.

Saar last week described the petition as hysterical and an attempt to silence contrary opinions. While the vast majority of the signatories do not support an academic boycott of Israel, they have joined forces over what they regard as the latest assault on freedom of expression in Israel. The petition states: "We have different and varied opinions about solving the difficult problems facing Israel, but there is one thing we are agreed on – freedom of expression and academic freedom are the very lifeblood of the academic system."

Daniel Gutwein, a history professor at Haifa University who is one of the signatories, described the minister's intervention as an attempt "to make Israeli academia docile, frightened and silent".

Although the BDS campaign – in various forms – has been running for over half a decade, it has become an increasingly fraught issue inside Israel in the past year since a small number of academics publicly declared support for a boycott, including Neve Gordon, author of Israel's Occupation and a former paratrooper who was badly injured while serving with the Israeli Defence Force.

Speaking to the Observer last week, Gordon said that many Israelis saw support for the BDS as "crossing a red line". Adding that he had received recent death threats, he said: "I am worried about what is happening to the space for debate in Israel. I find that there is a proto-fascist mindset developing. One of the slogans you hear a lot now is no citizenship without loyalty. It is an inversion of the republican idea that the state should be loyal to the citizen."

Israeli campaigners believe the Gaza flotilla incident represents a tipping point in raising support for boycotts. Musicians including Elvis Costello, Gil Scott Heron and the Pixies have cancelled shows in Israel. Hollywood actors also snubbed Jerusalem's international film festival and internationally acclaimed writers have supported the BDS movement, which is gaining support in dozens of countries.

"It's a different world to what it was even a month ago," says Kobi Snitz, member of an Israeli BDS group. "Suddenly, all sorts of people are supporting it – people that you wouldn't expect."

What is most interesting, however, has been the impact in Israel itself. Israeli journalist and blogger Noam Sheizaf wrote recently that such actions are now forcing Israelis "to think about the political issues and about their consequences… For a country in a constant state of denial regarding the occupation, this is no small thing." Sheizaf does not promote the boycott, but says: "I will gladly return concert tickets if that is the price for making Israelis understand that the occupation cannot go on."

Adi Oz, culture editor on the Tel Aviv weekly Ha'ir, appeared on Israeli national radio explaining her support for recent boycott activity. "When the Pixies cancelled their concert here I was disappointed," she says. "But I was not critical of the Pixies, I was critical of our government, because they are responsible for Israel's isolation." She adds that, post-flotilla, the cultural boycott is "something that everyone has a stand on – and some people are realising that they are in favour of it, without having thought about it before." There has also been a spate of boycott-related discussion in the financial press. The daily business newspaper Calcalist ran an uncritical profile of the Israeli campaigners behind Who Profits, an online database of Israeli and international companies involved in the occupation of the West Bank.

The project's co-ordinator, Dalit Baum, of the Coalition of Women for Peace, says: "Every day there is an article about this issue in the Israeli media, which creates a discussion about the economy of the occupation and raises the fact that there's a problem."