This article proposes a framework for understanding the processes involved in politically-motivated memory and identity formation. Specifically, it examines how these processes respond to both explicit and implicit politico-social motivations to suppress certain parts of them while augmenting others. The proposed framework draws from emerging commonalities between neuro-cognitive and psychoanalytic theories, and conceptualizes both internal and external prejudice as motivated cognitive-emotional phenomena in and of themselves, devoid of politically-motivated cognitive biases or prejudice. Using autobiographical, biographical and scholarly sources, I examine the motivated dissociation between the avowed and disavowed aspects of the conflicted Arab identity among Arab-Jews in Israel is examined. Following psychoanalytic theory, the proposed framework may explain not only the internal conflict within the Iraqi-Jewish community, but also the vehement support for anti-Arab political sentiments within the larger Arab-Jewish community in Israel (known more by the euphemism ‘Sephardi Jews’) – as ordained by the hegemonic Ashkenazi Zionist elite of Israel for the past 100 years. This article then traces evidence for the ‘return of the repressed’ among a growing number of contemporary Israeli Jews of Arab descent, who seem increasingly aware of the limited ability of the Zionist ‘melting pot’ ideology to adequately represent their identity. Based on the proposed framework, this article advocates for the impartial exploration of the disavowed Arab identity among Israeli Jews as a potential source of reducing pathogenic anti-Arab prejudice and promoting greater humanism in the Israeli-Palestinian conflict. Copyright © 2011 John Wiley & Sons, Ltd.