Waltz with Bashir
When it comes to full-length animated features from Israel, the best known would have to be Ari Folman and Yoni Goodman's Waltz with Bashir; this came out in 2008, the same year as $9.99, another high-profile Israeli animation. Waltz was not Israel's first animated feature, however, despite what at least one report has claimed.
The earliest film of this kind from Israel that I know of is Ba'al Hahalomot (Joseph the Dreamer), made in 1962 by Yoram Gross Films (a studio better known for its work in Australia). As can be seen from this trailer, the film is a stop-motion version of the Bible story:
Does anybody know of any earlier animated features from Israel?
For a good overview of Israeli animation, see this article from the Israel Film Center.- which notes that an in-production film, The Wild Bunch, is set to become the country's first CGI feature.