Prime Minister Benjamin Netanyahu clinched a deal to form a new government on Wednesday, just before a deadline was to expire, but the coalition will rule by only the slimmest of majorities in Israel's turbulent parliament.
"Israel now has a government," Naftali Bennett, the head of the far-right Jewish Home party announced at parliament after hours of haggling with Netanyahu's Likud deputies over cabinet positions, which were not immediately announced.
Nearly two months after a convincing election victory, Netanyahu has struggled to put together a coalition after a former ally abandoned him this week.
With barely two hours to spare as a midnight (2100 GMT) deadline mandated by law approached, the source said Netanyahu's right-wing Likud sealed an agreement with the ultranationalist Jewish Home, which advocates annexation of parts of occupied territory Palestinians seek for a state.
The sides were expected to announce their deal later on Wednesday evening, the sources said. Netanyahu's Likud party announced plans to issue formal statements at Israel's parliament.
With Jewish Home, the ultra-Orthodox United Torah Judaism and Shas parties and Kulanu, a centrist faction, the Likud-led government will control 61 of parliament's 120 seats. Such a narrow majority will make Netanyahu vulnerable to policy demands from even his most junior coalition partners, continuing a long tradition of unstable politics.
Jewish Home seems certain to push for the expansion of Jewish settlement in occupied territory, a policy that could deepen Israel's rift over the issue with its main ally, the United States, and the European Union.