This is the first time an Israeli film wins in this category since it was created 11 years ago.
The prize is worth 15,000 euros (about $23,670), and guarantees that director's next film will be screened in one of Cannes' official settings.
The Jury was presided by Taiwanese director and producer Hou Hsiao Hsien and was composed of French director Olivier Assayas, Danish director Susanne Bier, French actress Marina Hands and Laurence Kardish, curator for film and cinema at the Museum of Modern Arts.
"I imagined that we might win one of the prizes, but I didn’t expect the first prize," Elad Keidan told Ynet in a first interview immediately after the winners were announced. "On my first night in Cannes I dreamt that I had won the competition, and the truth is I was pretty stressed out. Now that it already happened, it's very exciting.
"I am proud of the fact that the judges, who are highly respectable filmmakers, liked the film. Particularly Hou Hsiao Hsien, who chaired the jury and is an admirable filmmaker. It's a real honor."
'Inspired by Iranian tradition'The film features a Jerusalem man touring the capital's Katamonim neighborhood. Keidan defines it as an existentialist movie dealing with Jerusalem's magic and wandering, saying that he was mainly influenced by the works of Israeli dramatist Hanoch Levin and Iranian filmmaker Abbas Kiarostami.
"This film is highly inspired by the Iranian tradition. It is very Middle Easter. It also contains references to the Egyptian cinema and a gesture to (Israeli filmmaker) David Perlov. It seems like I got everything in," he says.
What was the most exciting moment at Cannes?
"When Hou Hsiao Hsien, who hardly speaks English, told my photographer, 'Your film clever.' Hearing this from him was wonderful."
Seventeen films from Romania, Argentina, France, Britain, the Czech Republic, the United States, Finland, Brazil, Russia, South Korea, Germany and Belgium competed for the prize this year. Another Israeli film, "Shtika" ("Silence") by Hadar Morag of Tel Aviv University, also took part in the competition.
The Cinéfondation was founded in 1998 to promote the discovery of the new generation of filmmakers. A selection of 15 to 20 films from film schools worldwide is presented at the festival every year. The competition forms part of the Official Selection at the Cannes Film Festival.