Benyamin Netanyahu, Israel's prime minister-designate, has said his government will be a "partner for peace" with the Palestinians and take action to shore up their economy.
In a speech on Wednesday, a day after he secured the support of the rival Labor party to form a coalition, Netanyahu said that peace was a "common and enduring goal for all Israelis and Israeli governments, mine included".
"This means I will negotiate with the Palestinian Authority for peace," he said.
"I think that the Palestinians should understand that they have in our government a partner for peace, for security and for rapid economic development of the Palestinian economy."
Speaking to Al Jazeera, Gil Hoffman of the Jerusalem Post said Netanyahu's speech would have helped to reassure Barack Obama, the US president.
"He [Netanyahu] hasn't ruled out the two-state solution, but he doesn't see it as something holy, that he has to pursue at all costs, like other Israeli politicians have done," he said.
But Zeina Awad, Al Jazeera's correspondent reporting from Jerusalem, said Palestinians may not be greatly enthused by Netanyahu's pledge to pursue peace.
"Until [the issue of Israeli settlements], among many other issues such as the status of Jerusalem are addressed properly, I don't think the Palestinian leadership has much to hope for," she said.
Saeb Erekat, chief Palestinian negotiator and a member of Palestinian Fatah, told Al Jazeera he is not convinced that Netanyahu is committed to a two-state solution.
"As [Palestinian] President Abbas said, any Israeli government that accepts the two-state solution, agreements signed, agrees to negotiate on core issues including Jerusalem and settlement activity will be a partner.
"[Netanyahu] has not accepted a two-state solution. There is news now of a secret deal between Netanyahu and Yisrael Beitenu [a leading right-wing party in the new Israeli coalition] about going ahead with a major settlement bloc in east Jerusalem," he said,
Erekat was referring to a report from the Israeli Haaretz newspaper of a deal involving the building of 3000 settlement units between Maale Adomim and Jerusalem.
"If he carries out this project, he will not only torpedo the peace process, he will bury it. We will judge the deeds, not the words," Erekat said.
While 120 West Bank settlements have been authorised by the Israeli government since it occupied the territory in 1967, another 100 unauthorised outposts have also allegedly been established by settlers.
Palestinians have criticised the continuation of the settlement projects, calling them an Israeli move to create permanent "facts on the ground" that cut into areas under consideration for a future Palestinian state under the US-sponsored "road map" towards a two-state solution.
Israel's Labor party voted on Tuesday to join a governing coalition led by Netanyahu after considerable debate and opposition at its party headquarters in Tel Aviv.
Many members of the party had opposed joining a cabinet because of Netanyahu's limited interest in peace negotiations with the Palestinians.
With Labor's backing, Netanyahu has secured enough support in the Knesset, the Israeli parliament, to form a ruling coalition.
With Labor's support, Netanyahu has 66 seats in the 120-seat Knesset - 27 from Likud, 13 from Labor, 15 from the nationalist Yisrael Beitenu and 11 from orthodox Jewish party Shas.
Ehud Barak, the Labor leader, urged party members to back his decision to join the coalition, saying: "We are responsible for the state of Israel ... Unity is what this country needs.
"The majority of the citizens of this country want to see us together with the right in the government. And the majority of Labor voters want to see us in government.
"I am not right-wing ... We will be a counterweight to guarantee that we do not have narrow right-wing government, but real government that takes care of the country," he said.
Barak also dismissed accusations levelled at him that he only wanted to join the coalition to continue as Israel's defence minister.
Al Jazeera's Ayman Mohyeldin, reporting from the Labor conference in Tel Aviv, said Barak proposed that it was Labor's role and responsibility to balance out "what is seen as an extremely right-wing led government".
"He also made the case that he is the right man to continue as the defence minister. That is one of the positions believed to stay with Labor" in a new government, Mohyeldin said.