Despite the interest in governance transition in public education, it is challenging to find a theorised account of the process, and even more so in social democratic countries. To fill this gap, Israel can serve as a good case study for investigating how educational governance in social democratic countries changes under neoliberal influences. In the mid-2000s, the Israeli government presented the Dovrat reform, a greatly detailed plan for a new governance mode and multiple neoliberal policies in public education. Shortly after its introduction, political circumstances led to its formal demise, and as a result, many researchers called it a 'failed' neoliberal reform. As this analysis indicates, however, key features proposed by the reform ended up being implemented. This case study combines the 'garbage can model' and 'institutional change' theories to explain the dynamic of transition from a bureaucratic to a neoliberal governance mode in public education. The findings suggest that in Israel, and possibly in other social democratic countries, transition to neoliberal governance is a result of a dynamic that combines direct and indirect policy changes. The article discusses this dynamic and the circumstances that have helped produce it.