In a move that will send shockwaves through Israel and the world Jewish community, Professor Sacks departs from his usual policy of offering only public endorsement of Israel, and broad support for moves toward peace, by giving an explicit verdict on the effect that 35 years of military occupation and decades of conflict are having on Israel and the Jewish people.

"I regard the current situation as nothing less than tragic," he tells the Guardian in an exclusive interview. "It is forcing Israel into postures that are incompatible in the long run with our deepest ideals."

He goes on to speak of being "profoundly shocked" at the recent reports of smiling Israeli servicemen posing for a photograph with the corpse of a slain Palestinian. "There is no question that this kind of prolonged conflict, together with the absence of hope, generates hatreds and insensitivities that in the long run are corrupting to a culture."

He also admits that in 1967 he was "convinced that Israel had to give back all the [newly-gained] land for the sake of peace" - and he does not renounce that view now.

Prof Sacks is at pains to underline his continuing, avowed support for the Jewish state - citing repeated efforts by Israel to make peace, and the Palestinians' failure to take the same "cognitive leap" towards compromise. Nevertheless, and despite the careful phrasing of his remarks, referring twice to dangers "in the long run", many in rightwing Jewish and Israeli circles will be angered by his comments.

"The nature of these comments are quite unlike anything he has ever said before," one senior Jewish community figure said yesterday. "The right will be surprised and angry." Liberal and dovish Jews are bound to welcome his statements.

Since becoming chief rabbi in 1991 of Britain's Orthodox Jews, and the de facto leader of the country's 280,000-strong Jewish community, Prof Sacks has successfully avoided any overtly political pronouncements on Israel.

He has preferred to be a public defender of the country and to offer broad support for the pursuit of peace as a divinely-sanctioned endeavour. At the time of the Oslo peace process, he was in regular correspondence with the Israeli prime minister, Yitzhak Rabin.

But he has steered clear of opining on the moral status of Israel's occupation of the West Bank and Gaza, in sharp contrast with his predecessor, Immanuel Jakobovits, who sparked outrage more than a decade ago when he condemned Israel for "lording it over" the Palestinians.

Community insiders predicted that Prof Sacks' latest comments could prompt a similar wave of fury. Much of Anglo-Jewish opinion has followed the Israeli shift to the right since the outbreak of the current intifada two years ago.

The chief rabbi is bound to cause further controversy by calling for dialogue with the most extremist representatives of radical Islam.

In today's interview, timed for the publication of his new book, The Dignity of Difference, which is serialised in the Guardian this week, Prof Sacks says he would even sit down with Sheikh Abu Hamza - the fundamentalist north London cleric who admits to sharing the views of Osama bin Laden and who describes himself as a Taliban sympathiser. Yesterday the sheikh was quoted saying it was "OK" to kill non-Muslims, and equating Jews with Satan.

Nevertheless, Prof Sacks says a meeting between the two is "a thought worth pursuing. I absolutely don't rule it out."

The chief rabbi, 54, also reveals that he has already met one of Iran's highest-ranking clerics, Ayatollah Abdullah Javadi-Amoli. At a meeting brokered by the Foreign Office and never disclosed until now, the two met for secret talks during a UN conference of religious leaders in New York in 2000.

"We established within minutes a common language", says Prof Sacks, the "particular language believers share."