Labor Zionism grew in size and influence and eclipsed "political Zionism" by the 1930s both internationally and within the British Mandate of Palestine where Labor Zionists predominated among many of the institutions of the pre-independence Jewish community Yishuv, particularly the trade union federation known as the Histadrut. The Haganah the largest Zionist paramilitary defence force was a Labor Zionist institution.
Labor Zionists played a leading role in the 1948 Arab-Israeli War and Labor Zionists were predominant among the leadership of the Israeli military for decades after the formation of the state of Israel in 1948.
Major theoreticians of the Labor Zionist movement included Moses Hess, Nahum Syrkin, Ber Borochov and Aaron David Gordon and leading figures in the movement included David Ben-Gurion and Berl Katznelson.
Albert Einstein was among a number of prominent Jewish personalities that supported the Labor Zionist Movement.
Ber Borochov, continuing from the work of Moses Hess, proposed the creation of a socialist society that would correct the "inverted pyramid" of Jewish society. Borochov believed that Jews were forced out of normal occupations by Gentile hostility and competition, using this dynamic to explain the relative predominance of Jewish professionals, rather than workers. Jewish society, he argued, would not be healthy until the inverted pyramid was righted, and the majority of Jews became workers and peasants again. This, he held, could only be accomplished by Jews in their own country.
Another Zionist thinker, A. D. Gordon, was influenced by the völkisch ideas of European romantic nationalism, and proposed establishing a society of Jewish peasants. Gordon made a religion of work. These two figures, and others like them, motivated the establishment of the first Jewish collective settlement, or kibbutz, Degania, on the southern shore of the Sea of Galilee, in 1909 (the same year that the city of Tel Aviv was established). Deganiah, and many other kibbutzim that were soon to follow, attempted to realise these thinkers' vision by creating communal villages, where newly arrived European Jews would be taught agriculture and other manual skills.
The Left Poale Zion party ultimately merged with the kibbutz-based Hashomer Hatzair, the urban Socialist League and several smaller left-wing groups to become the Mapam party, which in turn later joined with other parties to create Meretz.
The Mapai party later became the Israeli Labor Party, which for a number of years was linked with Mapam in Alignment. These two parties were initially the two largest parties in the Yishuv and in the first Knesset, whilst Mapai and its predecessors dominated Israeli politics both in the pre-independence Yishuv and for the first three decades of Israel's independence, until the late 1970s.
In Israel the Labor Party has followed the general path of other governing social democratic parties such as the British Labour Party and is now fully oriented towards capitalism and even neo-liberalism, though recently it has rediscovered the welfare state under the leadership of Amir Peretz.
Labor Zionism is ironically associated within Israeli society as representing the country's ruling class and political elite whereas working-class Israelis have traditionally voted for the Likud since the Begin Revolution of 1977.
What distinguishes modern Labor Zionism from other streams is not economic policy, an analysis of capitalism or any class analysis or orientation but its attitude towards the peace process in the Israeli-Palestinian conflict with Labor Zionists tending to support the Israeli peace camp to varying degrees.