Then it will cease to be a democratic country.
many democratic countries have groups of residents (some permanent) living there but are not granted full citizenship and can't vote in national elections... in the US we have permanent legal residents (green-card holders). according to Google, there are about 12.7 million of them living in the US now.
Israel can set then up a complicated naturalization process where Gazan's can technically become full citizens, with some serious requirements about recognizing Israel's balabeteshkeit and a thorough education process in place.