Israeli Foreign Minister Avigdor Lieberman has resigned and said that his far-right Yisrael Beitenu party would not join the new coalition government being formed by Prime Minister Benjamin Netanyahu.
The surprise decision by the controversial foreign minister came just two days before a deadline for Netanyahu to form the next government in which he could have retained his ministry.
Lieberman said that his departure was related to a dispute over "principles" rather than portfolios.
This is certainly a coalition that, to my regret, does not reflect the positions of the nationalist camp and is not to our liking, to put it mildly
"This is certainly a coalition that, to my regret, does not reflect the positions of the nationalist camp and is not to our liking, to put it mildly," said Lieberman.
"We have reached the clear and unequivocal conclusion that it would not be right from our perspective to join the present coalition," he was quoted by Haaretz website as saying.
Briefing reporters, Lieberman said his party had been offered two cabinet posts as part of the coalition talks but remained unsatisfied.
During the negotiations, Lieberman had reportedly laid down a number of far-reaching demands for his agreement to join the coalition, including full responsibility for dialogue with Washington.
He also demanded that the government adopt as a strategic goal the removal of Hamas - the Palestinian group that rules over Gaza.
Speaking on Monday, he said it was clear that the next government had "no intention of overthrowing the Hamas regime".
He also pointed to delays in passing a bill to enshrine in law Israel's status as the Jewish state - a highly controversial measure which critics say would institutionalise discrimination against the country's Arab minority.
Gil Hoffman, a chief political correspondent for the Jerusalem Post, told Al Jazeera that "Lieberman complained that Netanyahu intended to go forward towards the creation of a Palestinian state".
The walk-out raised the prospect that Netanyahu, whose conservative Likud party won the most votes in a March 17 election, may have to settle for a narrower alliance to secure a majority in the 120-seat parliament.
Al Jazeera's Mike Hanna, reporting from Jerusalem, said that Lieberman's move was "a major blow to Netanyahu's attempts to gain control over 61 seats in parliament".
"The six seats that Lieberman would have brought to the coalition were ones that Netanyahu desperately needed," he said.
"As it stands at present, he is looking at a very narrow coalition that certainly create a far from stable government," he added.
Netanyahu could ask the leading centre-left opposition party Zionist Union to join forces in a "national unity" government, though both sides have so far played down any such possibility.
Netanyahu last week signed up his first new coalition partners, the ultra-Orthodox United Torah Judaism (UTJ) party and centrist Kulanu, giving him control of 46 parliament seats.
Likud is still negotiating with the far-right Jewish Home and ultra-Orthodox Shas parties.
Shelly Yachimovich, a senior Zionist Union lawmaker, did not rule out her party joining Netanyahu but said it appeared unlikely.
"I don't see an option like this," she told Israel's parliamentary television station. "It would be silly of me to consider something that does not exist."
Source: Al Jazeera and agencies