A few days before the establishment of the State of Israel, a sub-committee of the soon-to-be-government was convened to decide what to call the new country in Arabic, which was going to be an official language of the new Jewish state. They decided to call it Israel in Arabic because
Palestine was expected to be the name of the Arab state, which was expected to be established alongside Israel. The name
Zion was rejected because of the concern it would alienate the Arab citizens in Israel.
Source: Israel State Archives