The idea to create the settlement of Netanya was drawn up at a meeting of the Bnei Binyamin association in Zikhron Ya'akov. The location was decided upon near the ancient site of Poleg and it was decided to name it in honour of Nathan (Hebrew: Natan) Straus (1848–1931), co-owner of Macy’s department store, New York City Parks Commissioner, and president of the New York City Board of Health, who gifted two-thirds of his personal fortune to projects benefiting Jews and Arabs in Palestine."Netanya...was named for Straus in the hope he would donate money to them. When he told them he had no more money to give they were disappointed, but decided to keep the city's name anyway." In 1928 members of Bnei Binyamin and Hanote, an organisation set up after Straus was informed of the establishment of the settlement, are said to have purchased 350 acres (1.4 km) of Umm Khaled lands. There remains today, however, considerable controversy amongst Palestinian and Israeli interpretation about whether land was sold (primarily from non-resident Arab land holders) during the British Mandate.
On December 14, 1928 a team led by Moshe Shaked began digging for water at the site, finding it in February, 1929. Subsequently, on February 18, 1929, the first five settlers moved onto the land, plowing and cultivating it for the first time. The land was divided between the settlers in June, 1929 as slowly the vision of the settlement became reality. Development was set back, however when the 1929 Palestine riots and massacre caused the settlement to be abandoned for a couple of weeks. By September, however, development was back on track with the cornerstones for the first 10 houses being laid at Sukkot.
In the following years, Netanya continued to grow, with the first kindergarten and shop opening in 1930, and the first school in 1931, by which time there were 100 settlers. In 1933, the British architect Cliff Holliday proposed a plan for Netanya to become a tourist city
