British vice-chancellors may have their problems with the Government. But at least they can be fairly sure that officials are not going to turn up unexpectedly with plans to build a 20ft security wall straight through the football pitch, forcing students to negotiate checkpoints on their way across campus. That, however, is exactly what happened to Sari Nusseibeh, the president of Al-Quds University, the only Arab university in Jerusalem.

"To make matters worse," he writes in his autobiography, Once Upon a Country: A Palestinian Life, "many students pointed to the wall as proof that dialogue with the Israelis didn't work." They had a clear PR advantage, but violent protests would have led only to bloodshed and permanent closure. So Nusseibeh got in some "tigers" (street fighters who had spent time in Israeli jails) to prevent angry students throwing stones or petrol bombs. And he made sure that the football went on. This soon eased the tension, as the patrolling Israeli soldiers - "nervous recruits with their fingers on the trigger" - became ardent supporters of one team or another.

The protest lasted for 34 days, but eventually the Israeli Government backed down. It is a story that well illustrates the surreal challenges of running a university with no official legal status, and partly within and partly outside the borders of Jerusalem.

Nusseibeh comes from one of the most distinguished Palestinian families, whose links with Jerusalem stretch back 13 centuries to the Night Journey of the Prophet Muhammad. By long dynastic tradition, a cousin holds the key to the Holy Sepulchre. Nusseibeh's father was a Governor of Jerusalem under Jordanian rule. Yet although he was born patrician, the recent history of Palestine, he writes, has required of him "a certain chameleon-like adaptability: as metaphysician, professor, union activist, rebel, press agent, dissembler".

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Even this hardly does justice to Nusseibeh's dramatic life. He studied philosophy, politics and economics at the University of Oxford and went on to the Warburg Institute, before briefly joining his brother at an oil company in Abu Dhabi. Yet the respectable life of a businessman soon made him anxious that he was "beginning to lose his inner soul" and, while reading The Lion, the Witch and the Wardrobe, he made a snap decision to go to Harvard University to do a PhD.

Once in the US, he became fascinated by Thomas Jefferson, who gave concrete form to his moral and political ideals by founding the University of Virginia. Equally influential was the work of the 11th-century Islamic thinker, Avicenna. By the time he returned to Palestine in 1978, after 12 years abroad, Nusseibeh was almost 30 and armed with a well-thought-out philosophy of freedom and responsibility.

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For a while, he taught at both Birzeit University on the West Bank - which the Israelis dubbed "the hotbed of Palestinian nationalism" and frequently shut down - and at the richly endowed Hebrew University of Jerusalem. The latter offered a marvellous environment for intellectual debate and research, but he soon bowed out, unable to deal with the painful thought that his classes might include students "eagerly debating the intellectual power and elegance of Islamic philosophy one day, and the next day going off to do military service in the territories and treating my people - or me - like animals".

Although he still defines himself primarily as "an educator", Nusseibeh has also had many, usually unofficial public roles such as "Yassir Arafat's man in Jerusalem". During the first intifada (1987-93), he smuggled in money, acted as paymaster and organised places to sleep for those on the run, while also setting out Palestinian political claims in a document known as the Fourteen Points.

Yet Nusseibeh sees no contradiction between his roles as philosopher, teacher and political activist. "I occasionally write on abstruse topics such as God's Knowledge of Particulars in Avicenna," he tells me on a recent visit to London, "but I'm very interested in real life around me. I don't see a distinction between being a philosopher and an activist, in the field of education, institution-building or identity-building. In the classroom, in a university council meeting, writing an article or interacting with people, I see myself as fulfilling the role of a philosopher. I'm always in the middle, I'm always trying to apply speculation to the practical life."

For those sceptical about the role of academics in politics, he reminds us that the Oslo peace accord was forged "behind the backs of career politicians" by "a couple of professors with their heads in the clouds".

Once Upon a Country includes an amusing account of Nusseibeh's philosophy tutor at Oxford effortlessly demolishing his dearest previous convictions ("Making a cup of tea would have worked up more of a sweat"). Today, he seems very thankful for this humiliating experience: "Oxford philosophy did cut into my intellect to the core, which enabled me to develop a critical independence of mind that I don't think I'd have been able to have otherwise. I think the Oxford training was essential for me in that respect and I'm very grateful for it."

What he got from this training, he explains, is "a scepticism regarding big ideas, which helped me confront and reinterpret Palestinian ideologies and slogans". Although he is naturally very critical of Israel and has some wickedly funny descriptions of Israeli politicians - such as former Israeli Prime Minister Ariel Sharon "strutting like a flatulent Rambo" - Nusseibeh refuses to demonise his enemies and has always been a firm proponent of dialogue.

An early sign of this was the book No Trumpets, No Drums (1993) that he co-wrote with Israeli political scientist Mark Heller. "We worked together at a time when no one was doing it on the Palestinian side," he says now. "No one had swum in the deeper waters, so to speak, of what the new state would look like, what would happen to Jerusalem, borders, settlements - these things were not being talked about. I wanted to dot the i's and cross the t's for Palestinians who were seeking independence as a slogan."

How had this book stood the test of time, I asked him. Does it still offer a blueprint for what the future should be? "What it will be," he replies with a smile.

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It was while working on this project, during the first Gulf War (1990-91), that the Israelis came up with the absurd notion that he was spying for Saddam Hussein and threw him in jail. Nusseibeh was understandably worried that he wouldn't fare too well as a Palestinian among hardened Israeli criminals, particularly when the wardens kept "accidentally" leaving open the door to his cell. But in fact his fellow prisoners treated him royally, on the traditional underworld principle that "if our (expletive deleted) Government doesn't like you, you must be all right".

Far less supportive were the left-wing Israelis such as Heller whom he had known for years, who suddenly started believing their security services and turned against him. "With the exception of one or two very good friends, who maintained their belief in me," he says, "the others who stood by me were the criminals in jail and a right-wing rabbi who was in favour of settlements and the Greater Israel. It reflects one of the main concerns Israelis have about security. No matter how much they deal with you, the inner fear has still not been eradicated. The suspicion is there."

His three months in an Israeli jail, Nusseibeh now claims, were actually quite fun, an unusual sort of sabbatical that gave him a chance to think, read and review a book for History and Philosophy of Logic, although the editor changed the address in his credit line from "Ramle Prison" to "Jerusalem".

When Nusseibeh took over as president of Al-Quds in 1995, he writes, the university was "a microcosm of the many ills besetting Palestinian society ... poor, shoddily run and seething with religious fanaticism". Trying to turn it around was both a huge managerial challenge and a test case for his political philosophy of "identity, liberty and the will".

Nusseibeh clearly believes that the Palestinians have often allowed themselves to be provoked by Israeli oppression into over-reaction, which is then used to justify further oppression. His society and its leaders have been far better at analysing what has been done to them than at exploring concrete practical options for the future based on compromise rather than on strident ideology. Much of this malaise is rooted in education.

"People are not allowed to speak at home," he argues, "to question their parents or older siblings. They have to learn things by memory and are graded by whether they have memorised things accurately to the last detail. They are not encouraged to say anything new. You have to repeat what teachers tell you, parrot-fashion. You get people who graduate from high schools with very high marks and who can repeat all the formulas in the equivalent of the A-level chemistry textbook, but are totally ignorant of the basics behind those formulas. They become teachers themselves, and then they teach students in the same manner."

Nusseibeh still teaches at least a course a year at Al-Quds, normally ones "newly introduced with my prodding", in topics such as the philosophy of law, the philosophy of science - and, crucially, an introduction to critical thinking. "It's analysis, it's synthesis, it's team thinking, it's problem-solving. Some of it is straightforward logic, some puzzles and IQ tests. A combination of fun things, team things, problem-solving things," he says. Although such critical thinking "is absolutely essential for us as a people seeking independence", Nusseibeh believes that its absence has been and still is "a major problem in Palestinian education and in the Arab world more widely".

There are obviously major challenges in trying to build "a culture of dialogue and critical thinking" against the grain of much of his society and under constant scrutiny by the Israeli authorities. But there are also huge compensations. One of the most moving sections of Once Upon a Country describes how teaching Shakespeare, political thinking or moral philosophy had a relevance and urgency in Palestine it would never have had in the West.

"Once I began to get to know my students," Nusseibeh concludes, "I experienced a far greater intellectual intensity than I had known at Oxford or Harvard. Occupation made ideas as palpable as hunger or thirst or pain."

Once Upon a Country is published by Halban Publishers (?20.00).

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