Doswin- You dont become a citizen just by living in the country.
If both parents are not Israeli then the child is not Israeli either. HOWEVER, its in your best interest to go to Misrad HaPnim soon after the baby is born and renounce citizenship. When they tell you that its unecessary, reply thank you very much and please give that to me in writing.
That said, the law can always be changed retroactively, so you never know!