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The deal would gradually allow for European airlines to operate in Israel, adding destinations and flights.
Employees of Israeli airlines prostested and went on strike after the government approved a deal allowing for foreign competition in the airline market Sunday.
The 'Open Skies' deal would gradually allow for European airlines to operate in Israel, adding destinations and flights.
Employees from El Al, Arkia and Israir began their strike at 5 am, while hundreds picketed a cabinet meeting in Jerusalem.
Flights scheduled to Europe Sunday were moved up to 4 am to avoid the strike.
Airlines and their employees warn that the move could lead to layoffs and a loss of revenue.
Israel's Prime Minster said the Open Skies agreement was helpful in increasing tourism and efficiency.
"The goal of the reform we approved today is to reduce the costs of flights to and from Israel and to increase incoming tourism," said Prime Minister Binyamin Netanyahu, in a statement on Sunday.
"We will continue to advance reforms to reduce the cost of living and increase the efficiency of services to Israelis."
The deal has been in the works for many years, with the European Commission signing off on it last year.
Government officials waited til after the recent elections to pass the controversial plan.
El Al stock lost 6.5 percent of its value Sunday after the deal was approved.