Well, Palestinians do live there: in the Israeli-occupied West Bank, in Israel/Egypt-blockaded Gaza, and in Israel proper, under the name of “Arab citizens of Israel”, many of whom identify as Palestinian

While many Arabs fled or were expelled in 1948, not all of them were. Israel wants to call them “Arab citizens of Israel” or “Arab Israelis” not “Palestinians”: some want to go along with that terminological preference, a growing number don’t

(Not all Arab citizens of Israel are of Palestinian origin - some of them are Maronite refugees from Lebanon; there are also many Jewish Israelis of Jewish Arab descent, but in an Israeli context they are identified as Jewish not Arab. There are also Arabs in Israeli-occupied Syria, the Golan Heights, the majority of whom don’t have Israeli citizenship, but a minority do.)