Netanyahu, who is also the leader of the Likud party, has never publicly endorsed a two-state solution as a remedy to the Israeli-Palestinian conflict.
But since taking up the prime minister's post, he has adopted a more conciliatory tone, promising to hold negotiations with the Palestinian Authority to reach a permanent accord.
Netanyahu said his new cabinet would produce a peace and security plan soon, but gave no clear indications of how he would approach any peace negotiations with the Palestinians.
Jacky Rowland, Al Jazeera's correspondent in Israel, said Netanyahu had been deliberately vague on peace negotiations.
"From the point of view of Palestinian leadership, if you're going to enter into negotiations, you need to know what the end goal is," she said.
"Netanyahu has been deliberately vague of what the Palestinians can get out of this ... although he has been going through all the motions."
Netanyahu's cabinet with 30 members, including two women ministers, is Israel's largest to date.
As the cabinet held its first session, an extra large table had to be brought in to seat all the ministers.
Two prominent Israeli newspapers, the Yated Neeman and the weekly Shaa Tova, which cater to Ultra-Orthodox Jewish readers, digitally removed the two women ministers from the first group photograph of the new cabinet.
Publishing pictures of women is viewed by many in the Ultra-Orthodox community to be immodest.
As the new government got down to business, Menachem Mazuz, Israel's attorney-general, said he was weighing criminal charges against Ehud Olmert, Netanyahu's immediate predecessor.
Olmert faces accusations of granting favours to clients of his former law partner while serving as prime minister.
He has denied any wrongdoing in the case, but Mazuz said he was considering charging Olmert with fraud and breach of trust.
Avignor Lieberman, Israel's new foreign minister, is also facing corruption charges: he was questioned by police for a total of 12 hours in the days preceeding the cabinet meeting.