"I say to the Palestinian leadership, if you truly want peace, peace can be obtained. With the Palestinian Authority, we will seek peace along three tracks - economic, security and political," he said.

Palestinian statehood

Netanyahu made no specific mention, however, of Palestinian statehood, an important Palestinian demand that is supported by the US and other parties involved in mediating between the two sides.

"Under the final accord, the Palestinians will have all the rights to govern themselves except those that can put in danger the security and existence of the state of Israel," he said.

Netanyahu also said that he wanted "full peace" with all Arab countries, praising Islam as a rich religion, but he attacked Iran and "radical Islam" as threats to Israel's security.  

"Extremist Islam does not only threaten us, but it threatens us first and foremost ... Its goal is to erase the state of Israel from the face of the earth," he said.

The Palestinian Authority described Netanyahu's remarks as "not encouraging".

"The American administration should pressure the Netanyahu government to stick to the fundamentals of the peace process, in other words land for peace," said Nabil Abu Rudeina, spokesman for Mahmoud Abbas, the Palestinian president.

Direction 'unclear'

Yossi Shain, a political analyst from Tel Aviv University, told Al Jazeera that it was not yet clear what direction Netanyahu's government would take regarding the Palestinian question.

"It's a right-wing government, its a very controversial government, but it can make decisions"

Alon Liel,
former Israeli diplomat 

"It depends on what hand the government has in terms of the cards of the Middle East," Shain said.

"Keep in mind that when Menachem Begin came to power, he was a right-winger and he signed a peace treaty with Egypt. Netanyahu himself continued the Oslo accords with the Palestinians in 1996.

"The slogans and the rhetoric should be weighed very carefully."

The vote in the Knesset exposed the fragility of Israel's 32nd cabinet, which with 30 ministers is one of its largest ever, as five members of Labor, which has joined the coalition, refused to take part.

'Controversial government'

Likud is known for its hard line on security issues and conservative economic philosophy, while Labor's approach is relatively moderate and left-leaning.

Yisrael Beiteinu's ultra-nationalist policies are regarded as far to the right of even Likud and the appointment of Avigdor Lieberman, its leader, has proved particularly controversial.

"It's a right-wing government, it's a very controversial government, but it can make decisions," Alon Liel, a former Israeli diplomat, told Al Jazeera.

Netanyahu officially replaces Ehud Olmert, who stepped down amid multiple corruption investigations, on Wednesday.

Speaking on Tuesday, Olmert ended his term with an emotional defence of his premiership, acknowledging that he had made mistakes, but saying that there had also been successes.

"I accept with love the criticism of the government. I am proud of the government's achievements, which are many, and I am sorry for my mistakes and they are not few," he said.