Olmert voiced optimism shortly after the hour-long meeting at his office in Jerusalem with Avigdor Lieberman, the head of the Yisrael Beitenu party.
Olmert told his Kadima party members in parliament: "Yisrael Beitenu has expressed its willingness and readiness to join the coalition. I also expressed my satisfaction with the statement. I suppose all the technical details will be concluded swiftly."
Avigdor Lieberman, a right wing politician, head of the Yisrael Beitenu party and champion of Jewish settlements on territory occupied by Israel since the 1967 Middle East war, said: "We are joining the government."
He said after talks with Olmert: "We agreed that teams and attorneys would sit and word the agreement. I hope that by tomorrow morning, a document will be put together."
Olmert's bid for a larger coalition follows opinion polls showing a significant decline in his popularity and that of his government over their handling of the recent war in Lebanon in which the army failed to crush Hezbollah fighters.
Lieberman (R) wants to annex parts
of occupied West Bank (File)
None the less, Yisrael Beitenu's participation in the government would likely ensure that Olmert's plan to dismantle dozens of Jewish settlements in the West Bank, while strengthening others, remained on the shelf.
After the 34-day Lebanon war ended in August, Olmert announced that the "realignment" plan on which his centrist Kadima party won election in March was no longer a pressing issue for the government.
With the addition of Yisrael Beteinu, Olmert would control 78 seats in Israel's 120-member parliament, up from just 67 that currently support him, enhancing his prospects of passing a 2007 state budget on time.
The Labour party was divided over Lieberman's addition to the government and some politicians say they will fight it.
But some said Labour would eventually assent to Lieberman joining the government rather than drop out of the coalition, a move that could hurt its popularity further after the Lebanon conflict in which the party's leader, Amir Peretz, the defence minister, played a central role.
Lieberman, a 48-year-old immigrant from the former Soviet Union, wants to annex West Bank settlements and transfer some Arab towns in Israel to a future Palestinian state.
The burly former nightclub bouncer founded his party, whose name translates as Israel Our Home, in 1999 and served twice as a cabinet minister.
He was fired by Ariel Sharon, then-prime minister, in 2004 for opposing the withdrawal of soldiers and settlers from the Gaza Strip that Israel carried out last year.