In common with many novelists and poets living in countries torn by internal conflict, the Israeli writer Amos Oz is accustomed to having his work discussed in the West in a political rather than artistic context: "I have to carry the burden of writers who come from the troubled parts of the world." Aware that story is often overshadowed by political reality, he says, "If Moby Dick had been written by Nadine Gordimer or Ivan Klima or Gabriel Garcia Marquez, why then, critics would decide that the white whale symbolises the regime and the entire novel would take on a different meaning." Although in the West, Oz, author of My Michael (1968), A Perfect Peace (1982), Black Box (1988), To Know A Woman (1991), Fima (1993) and Don't Call It Night (1995) is regarded as a passionate and outspoken political commentator, he stresses, "I have never written political allegories; I don't take sides. I tell stories about people, the human condition, about the tensions between men and women. When I want to tell my government to go to hell - and I often do - I write an essay. I have two pens: one for stories, one for essays. And I keep the essays for the anger, for the rage. I live between essays and storytelling." Oz's radicalism has always been tempered by practicality; he is a pacifist. Above all, an optimist.

A short, sturdy figure, Oz is a quiet, slightly remote, gentle individual of immense charm, sharp wit, passion and some theatricality. In contrast with the prim decor of the smart Edinburgh hotel in which we met, he looks a man of action, more at home outdoors. At 58, he is fit-looking, attractive, slightly formal, less edgy than expected and the master of his natural impatience. His gestures are emphatic, expressive, extremely physical; his voice is soft, musical. The pale, washed, greyish-green eyes are intense and his responses are precise, poetic and shaped by the eloquent exasperated logic which dominates much of his writing. "I wish I could tell you I'm a Solzhenitsyn figure but I'm not - I do get my share of hate mail - but my heroic fantasies are unfulfilled. I have never been silenced, so I can not claim to share the experiences endured by the writers of South Africa, Latin America or of what was Eastern Europe."

Nor does he enjoy being described as a "modern prophet", a status his non-fiction collection The Slopes Of Lebanon (1987) and Israel, Palestine And Peace (1994) helped confer on him. "I'm not a prophet. For years, Israelis have undergone a collective Salman Rushdie death threat. The best I can say of the situation at home is that I expect an improvement. Don't ask me to predict when this will happen."

Oz's belief in compromise has often resulted in being denounced by his countrymen, "compromise may be pragmatic but it's better to be pragmatic and realistic. Everything is a compromise." He pauses, before adding, "I am wary of offering a comparison with Northern Ireland. I don't know enough about Ireland to comment. But I do see the Middle East situation as an easier one to solve. We are fighting over real estate, property. It is an international conflict between two nations. Northern Ireland is far more difficult. It is about two perspectives of the same country made from inside the family. It is far tougher; it's about emotions, about bad blood, temperament and tradition."

Displacement is a major theme in Jewish literature and in common with the work of Saul Bellow, Oz's fiction has always had a quality of being shadowed by the legacy of the Holocaust and of the memory of a silent Europe which was left without ever being forgotten. An outstanding work such as Fima, with its echoes of Goncharov's 19th-century classic Oblomov, feels like a Russian novel and much of his fiction, particularly the exasperated humour, has many parallels with Russian fiction. "I have always been aware of this `Russianness' both as a writer and as an individual. My parents were both Russian. No. I have never been to Russia. Nor do I speak the language. But I feel this Russianness in me. And I have read the writers."

Oz's grandfather, Alexander Klausner, a businessman, a poet and committed Zionist, fled from Odessa shortly after the October Revolution. Although believing that the time had come for the Jews to return to the Land of Israel, Klausner did not travel to the Jerusalem which featured in his poetry. Instead he initially settled in Vilna, then in Poland. Klausner was also very conscious of being European and felt that Israel was still insufficiently European for him. By 1933, however, survival had become a greater issue and Oz's grandfather reluctantly went to "Asia" with his wife and younger son, Oz's father. The elder son, Oz's Uncle David, a lecturer on European literature at Vilna University was, however, determined to stay. When the Nazis arrived, he, his wife and baby son were murdered.

By then living in Israel, Klausner continued to write poetry in Russian, glorifying the beauty of the Hebrew language and also that of the mythic Jerusalem of his imagination. His son, Oz's father, began working as a librarian and married a fellow Russian, the middle daughter of a Ukrainian mill-owner. They lived in a book-lined apartment in Jerusalem and as Oz says, "They both missed Russia; they were homesick. I could sense it. They didn't ever want me to learn Russian because I think they felt it would draw me back towards the deadly beauty of Europe. They spoke Russian and Polish at home. They read German, French and English for culture. They probably dreamed in Yiddish. But they brought me up speaking one language only, Hebrew." Their intention was clear; their son was to represent a new beginning - a plain, tough, Israeli, "fair-haired and free from Jewish neuroses and excessive intellectualism".

Born in 1939, in Jerusalem, the young Amos Klausner was an only child. Sent to a Hebrew school, instilling strong "National Religious leanings", he says his Jerusalem childhood made him "an expert in comparative fanaticism". For him the city was - and is - a refugee camp full of neurotic survivors. "The Jerusalem of my childhood was a lunatic town, ridden with conflicting dreams, a vague federation of different ethnic, national and religious communities. . . there were weird and crazy people from just about everywhere in the world, each with his own private formula for saving mankind. Many of them may have been secretly longing to crucify or to be crucified."

The British withdrew when he was nine and Jewish Jerusalem underwent a long siege. Within a few years, more than a million Jewish refugees arrived in Jerusalem. "But" as he wrote in an essay, "the siege and the suffering had not ended, universal salvation did not happen and the trivial pains of a very small state made themselves felt. . . Jerusalem did not turn into a `real' European city. The Jews did not become `a merry, contented race of rugged peasants'."

While Oz's father, the relentless scholar, continued his life of books until his death in 1970, his mother was unable to bear the disappointment of her present as well as the loss of her past. She committed suicide in 1952 when he was 12.

At 14, he left home, changed his name to Oz and went to work and live in Kibbutz Hulda. Working on the land, he also studied and met his wife, who was born in the kibbutz as were their three children. Having served in the army, he was then sent by the kibbutz assembly to study literature and philosophy at the University of Jerusalem, "on the understanding that I would teach the kibbutz children on my return".

Oz the writer first emerged as a boy writing biblical poems in which vengeance was exacted on the enemies of the Jewish people. The publication of his first novel, My Michael, in 1968 made him famous. It is an intense study of a woman's emotional and psychological world. Hannah tells her own story at the centre of which are the mixed feelings of love and pity she has for her dull, hardworking, yet determined, husband.

The Oz of today seems to find it difficult to believe that he ever attempted that book. "I was 24 when I wrote it. Young - young enough to think I could do anything. Writing inside a woman's mind. Now it is something I would never dream of doing. Women of all ages wrote to me. From Japan, from Australia, all over. They asked `How on earth did you know?' `How could you know?' There were others who asked `how dare you?' It was as if a voice was telling me what to say and I just wrote it down." More books followed Elsewhere, Perhaps; Touch The Water, Touch The Wind; Unto Death; The Hill Of Evil Counsel, Where Jackels Howl, A Perfect Peace, Black Box. Yet all the while, Oz's essays and articles were consolidating his position as Israel's leading international spokesperson on the Middle East. The artist was maturing.

Through the personality of Joel Ravid, the central character in To Know A Woman, Oz captured the complexities of one man's personality. Ravid is a secret agent who retires after his wife's bizarre accidental death. Secretive, impassive and determinedly passive, he is hardly the stuff of heroes as he gardens and begins a strict domestic regime. Oz seemed to be moving on from the earnest drama and stiff lyricism of his earlier work, reminiscent of South African Andre Brink, whose work is also often more important in content than particularly stylish. Within two years, however, Fima was published. It is a hilarious and moving portrait of a 54-year-old, post-divorce Walter Mitty figure who has become the ramshackle remains of a younger person who had once shown great promise. While passing his days in a state of utter confusion in a filthy flat, Fima also irritates his ex-wife who accuses him of filling her son's head - a truly strange 10-year-old with the fatalistic demeanour of a middle-aged man - "with the same sick birds that are fluttering around your own". The dialogue is superb, much of it conducted at high speed, exasperated by a group of bewildered characters. Oz attributes the comedy and new-found lightness of touch to "middle age; perhaps it is just growing older and seeing the funnier side of trying to live".

Don't Call It Night, the story of a middle-aged couple living in a state of careful romance and mutual dependence, further demonstrated his new tone of quiet confidence. Set in a new town, still without a history of its own - even the cemetery is empty - Oz is concerned with life as lived. Interestingly, while he has always been interested in male/female relationships, this time there is no conflict. Domestic ritual also dominates. "I have always seen these three novels - To Know A Woman, Fima and Don't Call It Night as a trilogy," he says, "they are concerned with ordinary things, household chores and just living."

AS a writer, dependent for his international audience on translation, he is grateful for his collaboration with Nicholas Lange. "Hebrew is a beautiful language, very rich, but it has a purity and simplicity which gets lost. Look at the Bible. In English, suddenly it becomes so formal. God sounds like a lawyer or an academic, instead of a poetic peasant."

Oz's delicately beautiful, atmospheric new book, Panther In The Basement, is set in Jerusalem in 1947. Proffy, the narrator, revisits his own past as a 12-year-old boy intent on saving his country. "The book is personal, autobiographical," agrees Oz, "but it is not confessional." Recalling that the first English words he learnt were "yes", "no" and "British go home", he says, "I was a boy who suffered an overdose of history, I was a little fanatic and wanted to make a rocket that could be launched in Jerusalem and blow up Buckingham Palace. But before it was perfected, the British moved out."

Young Proffy and his friends see themselves as freedom fighters but one morning the narrator discovers the words, "Proffy is a low-down traitor" have been painted on the wall of his house. Aside from the charge itself, Proffy is intrigued by the implications of the words themselves "The word shafel, `low-down' raised a question that still interests me now, as I sit and write this story. Is it possible for a traitor not to be low down? And if it is, under what circumstances is treachery not low down?"

Oz says the book is about "loyalty and betrayal," adding matter of factly, "loyalty and betrayal are central to everything." At the heart of the book is the boy's relationship with his father, a man who not only seeks refuge in knowledge but views his vast personal library as an endorsement of self. He speaks to his son only in the context of impersonal facts, history and culture, never feeling and it is this which Oz, who agrees Don Quixote provides a sub-text of sorts, considers the greatest betrayal in the story.

Of Israel, Oz remarks, "I live in a country where everyone screams and no one listens. You don't get two Israelis to agree about anything; you don't get one Israeli to agree with himself. We belong in a Fellini film, not an Ingmar Bergman one." According to Oz, a deep sense of insecurity brought the Jews to Israel "and the Arabs have made sure we kept that insecurity". In a radio talk broadcast in 1978, Oz said: "I hate the Jews as one can only hate one's own flesh and blood. I hate them with love and with shame. After all, we are not a `nation'. . . If some Jewish confidence-trickster is arrested in Lower Ruritania the whole tribe shudders at what `the World' will think. . . Yes we are a tribe, an extended family, a clan, and there are times when I feel suffocated and want to escape to the other side of the world to be alone and not to have to bear the perpetual burden of this Israeli intimacy." Israel, he says, is greatly sentimentalised in the West.

Thirty years ago, during the Six-Day War, Oz spent four days at the front in Sinai as Israel advanced on the Golan Heights. Later in 1973, he again saw active combat, this time for 11 days, in the Golan Heights when the Syrians tried to reclaim the territory. "I have never written about war," he says "not about the stench, the stink of it - literally - the smell of shells exploding, of shit, of bodies rotting. The fear."

It is true. Many of Oz's characters have gone to war. A Perfect Peace is set during the lead up to the Six-Day War. National service is a fact of Israeli life for the men and women in his work, but he has yet to draw on his personal experience of it. As ever the conversation returns to the subject of the literature of protest. Oz's place within it is something he contests, "but there is nothing I can do about this. I try to be prosaic, not prophetic or poetic."

Panther In The Basement by Amos Oz is published by Vintage at £6.99 in UK.