Background: Studies on factors explaining the socioeconomic inequalities in health within ethnic minorities are scarce. This study examines the contribution of material conditions, and psychosocial, community, cultural and behavioural factors to explaining educational disparities in self-rated health (SRH) within the Arab minority in Israel. Methods: In 2005, a national random sample of 902 persons aged 30–70 was selected in a multistage sampling procedure for interviewing. We used multistage logistic regression modelling to examine the percent of attenuations in odds ratios (OR) of extreme categories for education (low vs. high) in the associations with SRH after inclusion of explanatory variables. Conclusions: Material conditions are a major factor in explaining the educational disparities in SRH among Arabs in Israel. Most of the impact of psychosocial and health behaviours, together with part of the community effects, operated through material conditions. Reduction of educational inequalities in SRH requires provision of educational attainment opportunities accompanied by employment opportunities assuring equivalent material gains. Further examination of factors explaining health inequalities among other minorities is warranted.