Members of Israel's Kadima Party say they have finalized a deal with the left-center Labor Party to form a coalition government.
The officials say details of the power-sharing arrangement will be announced later Thursday after party officials sign a formal agreement.
Kadima was founded by former government chief Ariel Sharon and is now led by his successor, Acting Prime Minister Ehud Olmert. The party won the biggest bloc of parliament seats in last month's election, but not enough to govern on its own.
Kadima reached a deal with the Pensioner's Party Wednesday, and also is expected to win the backing of the ultra-Orthodox Shas movement.
Mr. Olmert hopes to form a government that will support his plan to draw Israel's final borders on a unilateral basis within four years, if peace talks with the Palestinians remain stalled.
Israel has refused to negotiate with the Palestinian Authority, which is now led by islamic militant group Hamas. The group also is refusing to recognize Israel, renounce violence and accept interim Israeli-Palestinian accords.
Palestinian President Mahmoud Abbas, whose Fatah group was ousted in January election, says he remains ready to resume peace negotiations, as head of the Palestine Liberation Organization.
Some information for this report was provided by AFP, AP and Reuters.