The European Union together with other international organizations have a significant role in creating world order, promoting international cooperation, and strengthening international security. For this reason, the EU has been interested in finding a two-state solution to the Israel-Palestine conflict which is one of the EU's top foreign policy issues. EU's failure to implement a two- state solution for Israel-Palestine puts the EU in a challenging position and questions its role as an international peacemaker. The starting point of the research problem is covered by the following question: How can the EU's failure to implement a two-state solution for the Israel-Palestine conflict be explained by realism and liberalism? The research problem is studied with the help of realism and liberalism, which are central schools in the political discipline; international relations. The chosen method for this research is a qualitative case study. The results shows that partly internal gaps within the EU, the US role in the conflict, monopolies of violence, disagreements among the Palestinian movements and the absence of binding international law are behind the EU's failure to implement a two-state solution. Despite this, the EU maintains stability in the region by being the main donor to the Palestinians and Israel's primary trading partners.