After the Great War relations between Arabs and Jews in Tiberias were generally good with few incidents occurring apart from the riots in 1929 in the Nebi Musa nearby. The first modern spa was built in 1929.
The landscape of the modern town was shaped by the great flood of November 11, 1934. Deforestation on the slopes above the town combined with the fact that the city had been built as a series of closely packed houses and buildings often with shared walls and built in narrow roads near the shore of the lake. The flood waters carrying mud, stones, and boulders rushed down the slopes and filled the streets and buildings with water so rapidly that many people did not have time to escape. There was great loss of life and property. The city rebuilt on the slopes and the British planted the Scottish Forest on the slopes above the town to hold the soil and prevent similar disasters from recurring. They also constructed new seawall moving the shoreline several yards out form the former shore.
In October 1938, Arab militants murdered 20 Jews in Tiberias during the 1936–39 Arab revolt in Palestine.
According to British census data, the population of Tiberias was 4427 Jews, 2096 Muslims, 422 Christians, 5 others
In 1922; 5381 Jews, 2645 Muslims, 565 Christians, 10 others in 1931 and 6000 Jews, 4540 Muslims, 760 Christians, 10 others in 1945.
On April 8th and 9th 1948, shooting broke out between the Jewish and Arab neighbourhoods of Tiberias. On April 10, the Haganah launched a mortar barrage, killing several Arab residents. The local National Committee refused the offer of the Arab Liberation Army to take over defence of the city and a small contingent of outside irregulars moved in. During April 10th – 17th , the Haganah attacked the city and refused to negotiate a truce, while the British refused to intervene. Newly arrived Arab refugees from Nasir ad-Din reported civilians being killed, news which brought panic to the residents of Tiberias. The Arab population of Tiberias around 6,000 were evacuated by the British military on 18 April 1948.