The State of Israel was cretaed in a peaceful and legal process by the United Nations, It was not created out of Palestinian Lands, It was created out of the Ottoman Empire, ruled for four hundred years by the turks, who lost it when they were defeated in World War I. There were no "Palestinian" lands at the time because there were no people claiming to be Palestinians.
In 1947 The UN partition plan mandated the creation of two states on the remaining 20 percent of the Palestinian Mandate: the State of Israel for the Jews, and another state for the Arabs. The Arabs rejected their state, and launched a war against Israel. This is the primal cause of the Arab refugee problem.