This article deals with the modes through which labour migration recruitment and control policies have enacted the racialisation of a new category of migrants previously unknown in Israeli society: that of non‐Jewish and non‐Palestinian labour migrants, adding a new stratum of disenfranchised people into an already complex and tension ridden society. Drawing on the work of Robert Miles, I see the racialisation of migrant workers in Israel as the result of political and social regulation forces conducted first and foremost by the state as a means of ‘crisis management’ in times of social and political unrest. Two regulatory sites have been central in the politics of racialisation of labour migrants in Israel: the binding system and deportation policy. My main argument is that while the labour market mechanism has drawn on the de‐politicisation of the role of the state in controlling labour migration through the privatisation of its regulatory functions into the hands of non‐state intermediaries and employers, the deportation policy has engaged in a continuous politicisation of the phenomenon premised on the representation of labour migrants as an offence to state sovereignty and law and as a threat to the demographic balance of the Jewish nation‐state. Both state mechanisms have operated in a complementary way and have not only aimed to maximise profits from and control over labour migrants, but have also served as a central means to actively prevent them from becoming rights‐bearing residents. Moreover, the apparent contradiction between state and market logics that underlies the labour migrant system combines a function of misrecognition that is crucial in reinforcing the legitimacy of state induced racialisation.