"Omar" is a political thriller directed by Hany Abu-Assad, director of the 2005 film "Paradise Now," which earned him an Oscar nomination and a Golden Globe for best foreign film.
The film, which was shot in the West Bank and Israeli Arab town of Nazareth last year, tells the story of three childhood friends. It criticizes Israel's policy and presents the IDF and Shin Bet in an unflattering light, including a scene in which a Shin Bet officer is seen brutally torturing a Palestinian prisoner.
The cast includes Adam Bakri, the son of Arab actor Mohammad Bakri who directed the 2002 film "Jenin, Jenin," which asserts that the IDF committed atrocious war crimes and deliberately slaughtered innocent civilians during Operation Defensive Shield in the West Bank city.
"Omar" received a standing ovation at its premiere as the first film fully funded by the Palestinian cinema industry.
"It is the only festival that I think still cares about different films," said Abu-Assad,
Festival draws to close with cliffhanger ending
The 66th Cannes festival wraps up with a cliffhanger ending on Sunday, with uncertainty surrounding which film will be declared best picture after a 12-day frenzy of premieres, celebrities, rain and dramatic jewellery thefts.
Twenty films packed with sex, violence and emotional anguish are vying at the world's biggest cinema showcase for the Palme d'Or, one of the most coveted film awards after the Oscars.
Frontrunners include French director Abdellatif Kechiche's love story "La Vie d'Adele" (Blue is the Warmest Color) with its graphic lesbian sex scenes, and "Inside Llewyn Davis" about a struggling New York folk singer by the American Coen brothers.
Also on the short list are "La Grande Bellezza" (The Great Beauty) from Italy's Paolo Sorrentino, a magical ode to the decadence of Rome, and "Le Passe" (The Past), a tension-filled domestic drama by Iranian director Asghar Farhadi.
Choosing the winner of the top prize and other awards is a jury led by US filmmaker Steven Spielberg with Australian actress Nicole Kidman and Oscar-winning director Ang Lee.
Reuters and The Associated Press contributed to this report