Exchanging USD in Israel

There is no problem converting US dollars to shekels. The are many currency stores all over the country that give good rates and charge no commission. The Post Office also provides change services with no commission. You can see the current rates on their web site:
http://www.israelpost.co.il/postcurrency.nsf/WebDisplay/$First?opendocument&l=EN
The rate will be only slightly better on the ATMs but after you factor in the loss when converting back to Euros plus the ATM fees, I suspect that changing the dollars in Israel will be the cheaper option.

Further to what #1 posted, please note that the worst place to change money are the banks - terrible rates, too much paperwork, and long lines. As suggested, use the currency exchange counters. If in Jerusalem, the best rates are the currency exchange counters in the Zion Square area (on Ben Yehuda St., corner of Jaffa Rd.).

Also, double currencies transactions, to euros and then euros to shekels are always more expensive.

Yes they are.

The fewer times you have to convert the better.

It's extremely easy to make change. I second those who say you should avoid changing in banks, unless you fancy standing in a line for two hours. The best rates are to be found in the little change shops located along Salaheddin street in East Jerusalem, on the Palestinian side of the city. You will also find reasonnable rates around Zion Square on JaFfa street in West Jerusalem, on the Israeli side. Do take a credit card just in case, pickpocketing is uncommon in Israel but you never know.

hi, i'll be travelling to israel in a week's time, and i'm wondering whether it's best to convert my sterling pounds (sorry not usa dollars) before i go. i've checked the rates with several foreign exchange places in london and the average i can get is NIS5.60 for 1 pound. do you think i would get a better rate if i exchanged it at the change shops in tel aviv? i'll be there for 7 days and am thinking of exchanging £500 sterling pounds. i definitely wont be exchanging any of my cash at the banks or airports. also, everyone seems to mention carrying US dollars in case shekels aren't accepted at tourist sites, is it ok to carry sterling pounds or should i exchange this to us dollars? my accommodation will be paid by credit card. your advice would be much appreciated. thanks.

Do not exchange twice.

Why not just use your ATM card and access cash as you need it?

If you look at the Post Office link that I posted above, you will see that the P.O is now giving 5.84, no commission. The currency stores may offer slightly more. There are currency stores and a post office at the airport that offer the same rates as those in the rest of the country. Sterling is accepted at all currency stores and P.O.s

Why would a tourist site in Israel not accept Shekels ???????? (do you think that the locals have to buy dollars to visit a museum, etc?).

Also check out the ATM fees.

The reason the OP didn't want to use the ATM was he is a non-American who had US dollars from a previous trip. He was looking for the best way to use those on a trip to Israel.