Now, according to the Merriam-Webster dictionary,
Main Entry: rac·ismPronunciation: \ˈrā-ˌsi-zəm also -ˌshi-\Function: nounDate: 19331 : a belief that race is the primary determinant of human traits and capacities and that racial differences produce an inherent superiority of a particular race
2 : racial prejudice or discrimination
It all boils down to the meaning of race. Which is:
Main Entry: 3raceFunction: nounEtymology: Middle French, generation, from Old Italian razzaDate: 15801 : a breeding stock of animals
2 a : a family, tribe, people, or nation belonging to the same stock b : a class or kind of people unified by shared interests, habits, or characteristics
As can be seen, there is a broader meaning to the word race than people usually think. We tend to only consider features that can be genetically passed on; but a community with shared interests can also be counted as a race.
Israel apologists tend to point out that Judaism is not a race by the criterion involved in defninition 2a. After all, Ashkenazis tend to be whitish, Sephardis tend to be brownish and the Ethiopian Beta Israel are outright black. True, but Judaism is above all a genetic concept, in that you're Jewish if your mother also is. In response to this, it is frequently claimed that you can join Judaism through conversion, and if you can join it it's not a race. Also true, but converts are asked to become fanatical subscribers to the myriad Jewish superstitions, which is not required of "genetical" Jews. These newcomers (which, anyway, are statistically almost irrelevant) become part of the Jewish race as per definition 2b above.
Some will still be unconvinced that Judaism is a race. But you can belong to a group that is not a race and still be racist. This happens in several layers in Israel. In the first place, Jewish groups hate each other. The Ashkenazim hate the Sephardim, the Sephardim hate the Ashkenazim (to the point of shouting "Hitler was right" at them), they both hate the Ethiopians, etc., with very specialized hates playing a particularly important role among the haredim (the Litvak hate Chabad, etc.). But all these groups are cemented by a common hate of the Arabs (do I have to clarify that this is a statistical statement, that allows for numerous individual exceptions?). And latent in the latter is a generalized hate of people not Jewish -- which is not explicitly promulgated by most Israelis, but is widely tolerated by the society. This hate can be perceived in the frequent assertions, by the Jewish clergy and West Bank settlers, that Jews are more sacred, more valuable or, simply, more worthy of life than non-Jews. As Shmuel Neumann, who describes himself as a "Ph.D. (...) actively involved in (...) an emigration program for Palestinians," put it recently in the settler organ Arutz Sheva:
One Jew named Chai is worth more than the two million so called Palestinians who inhabit Judea and Samaria. Barak may give the order to evacuate Jews, but the Almighty gave the order thousands of years ago to evacuate the gentiles[.]
The big, the enormous advantage that Zionists have is that there is no word to describe this hate of neighbors who are not Jewish. There is no horrible-sounding counterpart for the term "antisemitism." There exists a specialized word for the hate of Jews, but there's none for the symmetrical hate of non-Jews.
So that, until "antigentilism" or "goyophobia" gain currency, we will have to stick with "racism" to describe the mistreatment and abuse of the non-Jewish citizens of Israel and the occupied territories -- a fact which, itself, is beyond dispute.