Shaul Mofaz, the transport minister, issued a statement late on Sunday, putting further pressure on Ehud Olmert, who wants only a limited probe into the Israeli army's failure to achieve its stated war aims.
Mofaz, a former defence minister and army chief, said: "A state commission is the only means of returning to the public the confidence in the institutions of power."
A state commission is the most powerful public inquiry in Israel, usually presided over by a sitting or retired supreme court judge.
It can order witnesses to court to give evidence and order police searches to collect evidence.
"We don't have to wait any longer. The commission must be established immediately," Mofaz said.
Olmert has said that such an inquiry - previously ordered after the Arab-Israeli war of 1973 and Israel's 1982 invasion of Lebanon - would "completely paralyse" the Israeli leadership at a time of serious threat, including from Iran.
Mofaz, who for eight years, until May, occupied the most senior ranks in Israel's defence establishment as chief-of-staff and defence minister, is the first senior member of Olmert's ruling Kadima party to demand a state commission.
He issued the statement a day after about 30,000 Israelis protested in Tel Aviv demanding a state commission and calling for the resignation of Olmert, Amir Peretz, the current defence minister, and Dan Halutz, the army's chief-of-staff.
The government has been criticised for the 34-day war that left 162 Israelis dead and saw the north of the country bombarded by more than 4,000 Hezbollah rockets.
Olmert's critics say the war failed to destroy Hezbollah's offensive capability or to free two soldiers captured by the Shia militia at the start of the war.
The conflict cost Israel an estimated $5.7 billion and has been seen by the Israelis as undermining the credibility of their state's armed forces.