He immigrated to Israel in 1983, where served as a physician in the Israel Defense Forces (IDF), first as a conscript, then in the reserve forces. Following the end of his active duty, Goldstein worked as a physician, and lived in the Israeli settlement of Kiryat Arba near Hebron, where he worked as an emergency doctor, and was involved in treating victims of Arab-Israeli violence. He changed his name from Benjamin to Baruch, married a Soviet immigrant named Miriam, and had four children. Israeli press reports claimed that Goldstein refused to treat Arabs, even Arab soldiers serving in the IDF, believing it was against Jewish laws to treat non-Jews even for payment. This was also reflected in comments by his acquaintances.
Goldstein was active in Kahane's Kach party, and was third on the party list for the Knesset during the 1984 elections. He compared Israel's democracy to Germany under Nazism, and was in the habit of wearing a yellow star with the word Jude on it.
On February 25, 1994, that year's Purim day, Goldstein entered a room in the Cave of the Patriarchs that was serving as a mosque, wearing "his army uniform with the insignia of rank, creating the image of a reserve officer on active duty". He then opened fire, killing 29 worshippers and wounding more than 125. Mosque guard Mohammad Suleiman Abu Saleh said he thought that Goldstein was trying to kill as many people as possible, and described how there were "bodies and blood everywhere". Eventually, Goldstein was overcome and beaten to death by survivors of the massacre. According to Ian Lustick, "By mowing down Arabs he believed wanted to kill Jews, Goldstein was re-enacting part of the Purim story."
Palestinian protests and riots immediately followed the shooting; in the following week, twenty-five Palestinians were killed (by the Israel Defense Forces), as well as five Israelis. Following the riots, the Israeli government imposed a two-week curfew on the 120,000 Palestinian residents of Hebron, as the 400 Jewish settlers of H2 were free to move around. Israeli Prime Minister Yitzhak Rabin telephoned Palestine Liberation Organisation (PLO) leader Yasser Arafat, and described the attack as a "loathsome, criminal act of murder". The Israeli government condemned the massacre, and responded by arresting followers of Meir Kahane, forbidding certain settlers to enter Arab towns, and demanding that those settlers turn in their army-issued rifles, though rejecting a PLO demand that settlers be disarmed and that an international force be created to protect Palestinians. Goldstein was immediately "denounced with shocked horror even by the mainstream Orthodox", and many in Israel classified Goldstein as insane.
Goldstein's gravesite became a pilgrimage site for Jewish extremists. In 1999, after the passing of Israeli legislation outlawing monuments to terrorists, the Israeli army dismantled the shrine that had been built to Goldstein at the site of his interment.