Israeli Prime Minister Benjamin Netanyahu
Prime Minister Benjamin Netanyahu struck a surprise deal with the opposition Kadima party to form a new, broad coalition government, axing plans for a snap election.
The move puts Netanyahu at the helm of a ruling coalition with an overwhelming 94 votes in the 120-seat parliament, reports AFP.
The White House said the surprise coalition would not make Washington change its "policy approach" to its close Middle East ally.
"A new coalition in Israel will certainly not affect our policy approach, and we continue to have very good relations with leaders in Israel ... We provide significant support for and coordination with Israel's military on security interests," White House spokesman Jay Carney told reporters.
The agreement to form what will be Israel's seventh national unity government was to be put to a vote in the Knesset, officials said.
Under the agreement, Shaul Mofaz, who took over leadership of the centre-right Kadima party only six weeks ago, would become vice prime minister as well as a minister within the premier's office, a draft of the deal showed.
The two men negotiated the 11th-hour deal as the Knesset was voting on a motion to end its current session to clear the way for early elections this September rather than October 2013 as scheduled.
Speaking at a joint news conference with Mofaz, Netanyahu said the agreement would give greater stability to the coalition, which is led by his rightwing Likud party.
"When I saw I could form a broad coalition, I realised I could return the stability without going to elections," he said.
Mofaz said Kadima's decision to remain in opposition for the past three years had been "a historic mistake."
Over past months, Mofaz has launched several attacks on Netanyahu, notably accusing him and his Defence Minister Ehud Barak of manipulating the threat of a nuclear Iran to score political points and scare the Israeli public.
Asked about the differences between his view on Iran and that of Mofaz, Netanyahu said the issue would be handled in a "serious and responsible" manner.
"Certainly one of the most important issues is the Iranian issue," he said.
Under the deal, Kadima and Likud will by the end of July replace a contentious law that allowed ultra-Orthodox Jews to defer their military service, with new legislation that would ensure a "fair" sharing of the burden of army service.
The deal also involves a commitment to renew the peace process, with Netanyahu saying he hoped the establishment of a new government would encourage the Palestinians back to the negotiating table after a hiatus of more than 20 months.
Mofaz said Israel should "negotiate with the Palestinians to achieve an interim agreement before a permanent agreement."
For his part, Abbas called on the new government "to seize the occasion of the enlargement of the coalition to speed up the achievement of a peace deal with the Palestinian people and their leaders."
In Washington, State Department deputy spokesman Mark Toner said: "We certainly do welcome Prime Minister Netanyahu's statement to the press that the new Israeli coalition will pursue responsible peace. And we certainly look forward to supporting the parties' efforts to achieve that two-state solution."