Israel's Benjamin Netanyahu opened coalition talks with the centre-left Labour Party on Monday, seeking an alternative to a right-wing government that could lead to friction with Washington over Middle East peace.
Negotiators from Netanyahu's hawkish Likud party met their Labour counterparts only hours after the prime minister-designate enlisted the ultra-Orthodox Jewish Shas party as a coalition partner.
Labour is led by Defence Minister Ehud Barak, who faces stiff opposition within his party to an agreement with Likud.
The partnership with Shas, following a deal earlier this month with the Yisrael Beitenu party led by ultranationalist Avigdor Lieberman, moved Netanyahu a step closer towards establishing a narrow, right-wing government.
Such a coalition could put Netanyahu on a collision course with U.S. President Barack Obama, who has pledged to move swiftly towards a land-for-peace deal between Israel and the Palestinians.
International concern has also been raised over Netanyahu's promise to appoint Lieberman foreign minister. Lieberman has proposed transferring land where many of Israel's 1.5 million Arab citizens live to a future Palestinian state in return for Jewish settlements in the occupied West Bank.
Netanyahu, still short of a ruling majority in the 120-member parliament, wants to shift the focus of currently stalled negotiations with the Palestinians from territorial to economic issues.
"Now we have 53 lawmakers tied into coalition agreements headed by Benjamin Netanyahu and in the coming days we will work to broaden the parliamentary base for support for his government," said Likud legislator Gideon Saar.
Netanyahu has said repeatedly since last month's ballot that he prefers a "unity" government. But he has failed so far to woo the centrist Kadima party, which leads the outgoing government, into a wide coalition.
Kadima's leader, Foreign Minister Tzipi Livni, has demanded Netanyahu commit to the establishment of a Palestinian state.
Netanyahu faces an April 3 deadline to complete the formation of a government after being given the task last month by President Shimon Peres.
Barak, likely to remain defence minister in a coalition deal with Netanyahu, said he would ask his party's executive on Tuesday for a mandate to join a Likud-led administration.
But party rivals say joining the government would sound the death knell for Labour, once the dominant force in Israeli politics and now, with 13 seats, the fourth-largest party in parliament.
In last month's election, Likud won 27 seats, Kadima polled 28, Yisrael Beitenu took 15 and Shas captured 11.
Yaakov Margi, a Shas legislator, said after the coalition agreement was signed that the party would not reject peace moves with the Palestinians out of hand.
"We are in favour of examining every diplomatic issue on its merits. We never represented ourselves as being opposed to the peace process," Margi told Israel Radio.