The most important feature that distinguishes an electronic transaction from other transactions is that it is done via electronic means, such as the Internet. There are many parties involved in concluding the contract between the merchant and the buyer. The merchant and buyer need an Internet service provider to allow the parties to communicate via the Internet, and also enable them to use the Internet and browse websites. This paper will examine the liability of the Internet service provider in an electronic transaction. In addition, this paper seeks to clarify the nature of the liability for any harm caused to the user during transaction, and also in the case of an incomplete electronic contract or disconnection of the communication, that leads to harm/damage to the users. In fact, the current laws in Palestine are inadequate to regulate the issues of Internet service provider liability in e-transactions. This study is a doctrinal research using both analytical and library research to examine the main issues of service providers liability in e-transaction. The laws of Palestine, Bahrain and Directive 2000/31/EC are used in this study to clarify the legal positions on the relevant issues above. The materials for this research are collected from the primary sources including statutes, rules, regulations and case laws; besides secondary sources such as books and manuscripts, academic journals, parliamentary reports, newspaper articles and other periodicals. It is found from this study that, the Palestinian presidential decree No. 15/2017 relating to e-transactions does not examine the liability the Internet service providers. In addition, Palestinian presidential decree No. 10/2018, relating to cybercrimes does not examine the liability of the ISP relating the content of information in a special issue. In general, the liability of the ISPs depends on their role and duties in controlling the content of information in general; they would be liable if they are aware of the illegal content in information, and they do not take any procedures to remove it. In addition, ISPs would be liable under the condition of contractual liability if they fail in fulfilling their obligation according to a valid contract. In other words, the contract clarifies the obligations and the duties of the ISP in controlling the content of information, and he is obliged to check the content to know about any illegal information and remove it, because the terms of the contract obligate him to control the information. The benefit of this paper is to propose some recommendations to develop the Palestinian laws in order to address the issues of internet service provider liability which will contribute in the development of e-commerce in Palestine.