Six years later "The Attack" is garnering interest on the festival circuit, winning praise in Toronto, an award in Marrakech, and wowing audiences at the Dubai international film festival in the United Arab Emirates last week.
"When they got the script they rejected it, and they not only rejected it, they pulled the project and kept the script. We had a three-year legal battle to try and get it back," Doueiri, whose 1998 debut "West Beirut" drew praise at Cannes, said after a screening.
"I understand the sensitivity of the film and I knew at the start it had a lot of landmines along the way. We knew we were going to have people who oppose it on the Arab side and the Jewish side."
Now he has distribution in 40 countries including the United States for a dark love story in which an Arab Israeli surgeon, Amin Jaafari, who is a model of successful integration in Jewish society is on a mission to find out if his wife Siham was the suicide bomber who killed 17 children at a birthday party.
In the opening scene he is honored at a ceremony for his work, offering platitudes in a speech about Arab and Jewish coexistence, the next day he is thrown into brutal detention as the suspect husband of a terrorist.
Eventually released after police realize he knew nothing about the attack, the surgeon, played with gripping understatement by Ali Suliman, begins to see that perhaps his wife of 15 years had done it after all.
He follows clues that lead to Nablus in the Palestinian territories where he finds Siham's posters plastered on walls as a martyr and locals treating him as a turncoat.
Towards the end he takes a trip to Jenin - site of an Israeli operation in 2002 that left dozens of Palestinians dead - in a scene that Doueiri said was meant to signify that Amin understood what drove his wife though he didn't condone it.
Doueiri said graffiti on the ruins of homes in Jenin reading "Ground Zero" - a reference to the site of New York towers destroyed in the 9/11 attacks in 2001 - was one scene that particularly riled his original US collaborators.
Amin also realizes that while he was a part of Israeli society, his wife had felt like an outsider.
"It's about this man who is absolutely attached to his wife, who believed at the beginning of the film that he could be very well-integrated into Israeli society," Doueiri said. "Only, at the end there's that truth that comes up that the bottom line is there's us and there's them."
The film has already drawn sharp reactions in the Arab world, with some Algerian media accusing Doueiri of defiling the novel that inspired it, by Algerian writer Yasmina Khadra, and Moroccan Islamists accusing it of being pro-Israel.
Much of the film's dialogue is in Hebrew.
Doueiri and fellow scriptwriter Joelle Touma altered a number of elements in Khadra's ending, in which Amin dies in an Israeli drone strike as he confronts the sheikh who mentored his wife.
The film has the surgeon return to Tel Aviv, living with his guilt but shunned by friends for not revealing what he knows to the authorities - a shift reflecting Doueiri's ambitious intersection of the personal and the political.
"We wanted to show that Amin has an incredible moral problem by his wife killing innocents. If she had blown herself up at a military checkpoint, Amin would not have had such a big problem," Doueiri said.
"I challenge anyone to tell me I took the side of the Israelis. I just wanted to make a film where I did not shout slogans and soundbites. We had that for years."
The Attack has echoes of "Paradise Now", another suicide bomb film - also starring Nazareth-born Ali Suliman - which won international acclaim.
"It was shown in Toronto and when American producers saw it they wanted to distribute it again," Doueiri said. "I thought we really nailed the script, so we didn't give up the fight."