Palestinian groups used to initiate few attacks on Israeli targets from both the West Bank and Jordan before the Six-Day War, some of which caused Israel to retaliate which became known as the Reprisal operations. Following the seizure of the West Bank from Jordan in the June 1967 Six-Day War, Israel destroyed the existing Palestinian group Fatah networks there. In early 1968, however, Fatah guerrillas began raiding Israel from bases on the Jordanian side of the river. Most of these attacks were blocked by the Israel Defense Forces. At times, Jordanian Army infantry and artillery units gave the Fatah squads covering fire, leading to frequent direct skirmishes between the IDF and the Jordanian Army.
On 14–15 February, Jordanian mortars hit several Israeli settlements in the Beit Shean Valley and Jordan Valley. Israeli artillery and air forces retaliated against Jordanian bases and artillery batteries, as well as the American-financed East Ghor Canal (now known as the King Abdullah Canal). As a result, thousands of Jordanian farmers fled eastwards, and fedayeen (agents willing to sacrifice themselves for the Palestinian cause) moved into the valley. An American-sponsored ceasefire was arranged, and King Hussein declared he would prevent these groups from using Jordan as a base for attack.
In February, King Hussein sent twenty carloads of troops and police to order a Fatah unit to leave the town of Karameh. When it arrived, the column found itself surrounded by men wielding machine guns; their commander said "You have three minutes to decide whether you leave or die". They withdrew. By March, several hundred civilians lived in the camp, along with about 900 guerrillas, mostly from Fatah, and PLO leader Yasser Arafat, who had his headquarters there.
In Israel, Chief of the Military Intelligence Directorate Aharon Yariv stated that a raid would damage Fatah's prestige. On the other hand, Israeli Foreign Minister Abba Eban and his chief of bureau Gideon Rafael — mindful of an adverse American reaction due to the good relationship between Jordan and the US — worried a raid could result in innocent civilian deaths and be a political disservice to Israel. Chief of Staff Haim Bar-Lev promised a "clean action". Israeli Defense Minister Moshe Dayan asked for a "principal approval" for a raid, but this was denied by the cabinet. On 13 December, Operation Karameh was scheduled for the next night, it was placed in the hands of both Brigade 35 of the Paratroop Corps and the Sayeret Matkal special-operations force. The operation was called off, rescheduled for 12 March and then called off again. Dayan warned the other ministers that a bus might strike a mine. On 18 March, an Israeli school bus was blown up by a mine near Be'er Ora in the Arava, killing two adults and wounding ten children. This was the 38th Fatah operation in little more than three months. That night, the cabinet approved the attack. The U.S. tried to prevent it by forwarding Israel a message from King Hussein. Israeli Prime Minister Levi Eshkol called in the cabinet for further counseling; only the National Religious Party leader Haim-Moshe Shapira vocally opposed the attack, while Education Minister Zalman Aran opposed it too but remained silent.
There was an intelligence informant who was a former Fatah member, code-named "Grotius" who was said to be familiar with the base in Karameh and its surroundings. Grotius is said to have arrived in Jordan as a member of the 421st Commando Battalion of the Palestine Liberation Army, on the eve of the Six-Day War. After deserting his battalion, he trained in Syria at the Hama camp and later slipped into the West Bank. Israel assumed that the Jordanians would ignore the invasion, however, the Israelis were met with heavy resistance from them.