Shimon Peres, Israel's president, has asked Benyamin Netanyahu, the leader of the Likud party, to form a new coalition government within six weeks.
Peres and Netanyahu held a news conference in Jerusalem on Friday where Netanyahu accepted the offer.
"I hereby designate Benyamin Netanyahu to form the upcoming government ... there are many challenges ahead," Peres said.
Parties representing 65 legislators have backed Netanyahu to become prime minister, he said.
Security and peace
Netanyahu said that he now had a "responsibility to establish security in our state and to establish peace with our neighbours."
He emphasised the need for political unity saying: "Let's join hands and co-operate to ensure the future of Israel."
"I think the rhetorics of the new government will be different, but I'm not sure the deeds will be so different"
Gideon Levy, columnist for the Haaretz newspaper
Netanyahu will now have to negotiate with other parties to form a coalition government.
He said he wanted to form a broad coalition government that also included the Kadima party, headed by Tzipi Livni, and the Labour party.
Earlier on Friday Livni, who is Netanyahu's main political rival, rejected talks of joining a coalition with the Likud leader.
"I will not be a pawn in a government that would be against our ideals," she said after meeting Peres.
"Things are clear. What is being created is a government without political vision, a government with no values."
"We need a government based on a two-state solution," Livni said, referring to Netanyahu's stance on negotiating peace with the Palestinians.
While Kadima won one more seat than Likud in the Knesset, Israel's parliament, during general elections on February 10, the president traditionally asks the party most likely to be able to form a coalition to lead the new government.
Netanyahu's bid to become the next prime minister was boosted on Thursday when he won the backing of Avigdor Lieberman, the leader of the far-right Yisrael Beitenu party.
Al Jazeera's Rob Gilles, reporting from Jerusalem, said that while Netanyahu is being asked to lead the government, his prime ministership is "far from a done deal".
"Yesterday, 65 MPs pledged their support to him, but to actually get those pledges turned into real action, he has to do some horse-trading with the various parties. He has to offer them certain positions."
"If those positions are offered and they agree, then those pledges will be turned into firm offers, in which case, he will have enough to form a [government]."
The rise of Lieberman's Yisrael Beitenu in general elections and the choice of Netanyahu to lead a new government represents an apparent shift to the right in Israeli politics.
Despite this, Gideon Levy, a columnist for the Haaretz newspaper, said he expected "more of the same" from a new coalition government.
"I think the rhetorics of the new government will be different, but I'm not sure the deeds will be so different. Don't forget that the key is still in Washington," he told Al Jazeera.
"The right-wing parties are so eager to be joined by the central parties like Kadima because they know that this right-wing policy will not be accepted in Washington, and will not lead to anywhere."
Reacting to the Israeli president's choice of Netanyahu, Nabil Abu Rudeineh, the spokesperson for Mahmoud Abbas, the Palestinian president, said the Palestinians were ready to negotiate with the new Israeli government on certain conditions.
|Peres said that Netanyahu had the
backing of 65 MPs [AFP]
"We will deal with any Israeli government if that government commits itself to the two-state solution, previous agreement, halting settlement activities, and international law," he said from Bahrain.
Nour Odeh, Al Jazeera's correspondent reporting from the occupied West Bank, said that Palestinian governments had dealt with parties across the Israeli political spectrum in the past, and politicians felt that none, including Likud, would improve their situation.
"The peace process and negotiations have been suspended ... so really it will be much of the same.
"There will be no progress - stagnation at the very best, if not escalation."
Al Jazeera's Jacky Rowland in Jerusalem said that there was little hope for successful Israeli policy changes in regard to the Palestinians with Netanyahu in charge.
"It is very difficult to see exactly how [they] would come about, particularly if he is sitting in a government with people like Avigdor Lieberman who have said that absolutely no way are they willing to negotiate dividing Jerusalem or give Arab neighbourhoods of Jerusalem to be the capital of a future Palestinian state," Rowland said.
"So if he does try at any stage to enter into negotiations on matters of substance then the coalition is likely to fall."