From the formation of the modern State of Israel on May 14, 1948, through 1952, banknotes continued to be issued by the Anglo-Palestine Bank as the Palestine pound, which was pegged at £P1 = £1 sterling.

The Anglo-Palestine Bank changed its name to Bank Leumi Le-Yisrael (National Bank of Israel), and the currency name became the Israeli pound.

The Israeli pound was the currency of the State of Israel from June 1952 until it was replaced with the shekel on February 24, 1980.

The pegging of the Israeli pound to sterling was abandoned on January 1, 1954.

The sub-division of the Israeli pound was changed from 1,000 prutot to 100 agorot.

The law came into effect in February 1980, when the Israeli government introduced the 'Israeli shekel' (now called old Israeli shekel), at a rate of IL10 = IS 1.

The original shekel, now known as the old shekel, was the currency of the State of Israel between February 24, 1980, and December 31, 1985.

Since the economic crisis of the 1980s and the subsequent introduction of the new shekel in 1985, the Bank of Israel and the government of Israel have maintained much more careful and conservative fiscal and monetary policies, and have gradually introduced various market-based economic reforms.

In 1985, coins in denominations of 1 agora, 5 agorot, 10 agorot, ₪1⁄2, and ₪1 were introduced.

Beginning on September 4, 1985, banknotes are introduced in denominations of ₪5, ₪10, and ₪50.

The original shekel, now known as the old shekel, was the currency of the State of Israel between February 24, 1980, and December 31, 1985.

The new Israeli shekel has been in use since January 1, 1986, replacing the hyperinflated old shekel at a ratio of 1000:1. It is the currency of Israel and is also used as legal tender in the Palestinian territories of the West Bank and the Gaza Strip. The new shekel is divided into 100 agorot.

An ₪1 note followed on May 8, 1986.

The ₪100 note issued on August 19, 1986.

On April 2, 1988, the ₪20 note issued.

In 1990, ₪5 coins were introduced.

Production of 1 agora pieces ceased in 1990, and they were removed from circulation on April 1, 1991.

The ₪200 note issued on February 16, 1992 completing the family.

In 1995, ₪10 coins were introduced.

A plan to issue a ₪500 banknote, carrying the portrait of Yitzhak Rabin, was announced shortly after Rabin's assassination in 1995. However, due to low inflation rates, there was no need for such a banknote and it was never issued.

The Second series of bank notes was released in 1999, replacing the first series by 2005.

Since January 1, 2003, the new shekel has been a freely convertible currency.

A ₪2 coin was introduced on December 9, 2007.

The 5 agorot coin, last minted in 2007, was removed from circulation on January 1, 2008.

On May 26, 2008, CLS Bank International announced that it would settle payment instructions in new shekels, making the currency fully convertible.

In April 2011, it was reported that new coins would be minted that would use less metal and thus lower costs. Counterfeiting would also be harder.

On November 14, 2012, the Bank of Israel announced that the new series of banknotes is in the final stages of design.

The first of the new banknotes to begin circulation was in the ₪50 denomination on September 16, 2014.

The ₪200 note was issued on December 23, 2015.

The final two denominations, ₪20 and ₪100, were issued on November 23, 2017, completing the "Series C" banknote series.

In 2022, the Bank of Israel announced a new series of coins featuring updated inscriptions for its coins, with "new shekels" replacing "new sheqalim".