Hole in the Moon (1965)

A new immigrant, Tzelnik, arrives at the port of Jaffa. He goes to live in the Negev desert where he opens a kiosk in the middle of nowhere. Mizrachi comes along and opens a competing business across the way. The two make a living by selling to each other. As there is nothing there, they decide to create a world out of their imagination. They build a cardboard film set, which slowly takes on real dimensions- the buildings turn to concrete, people come to audition for parts in the "film" (cinema 'verite' style, with Zohar mocking viciously the pretensions of the "actresses") and builders come to void apartment buildings (mocking the glorification of concrete and "heroic" settlement). In one sequence, Arab actors come and ask the filmmakers turn positive to negative, and they're given the role of pioneers who plow the land and sing Zionist songs. The imagined world of the filmmakers becomes so real eventually they lose sight of the thin line between fantasy and reality.