The centrist Kadima Party of acting Israeli Prime Minister Ehud Olmert has signed a coalition deal with the ultra-Orthodox Shas Party, clearing the way for a parliamentary majority.
Media reports say Shas' rabbis approved the deal late Sunday. With Shas on board, the coalition now controls 67 of the parliament's 120 seats.
The majority is crucial to pushing through Mr. Olmert's plan to withdraw from large parts of the West Bank and draw Israel's final borders.
Kadima won the most seats in parliamentary elections in March, but not enough to govern on its own. Mr. Olmert has since gained the backing of several other parties to form a coalition.
Meanwhile, Palestinian Prime Minister Ismail Haniyeh says he expects the Hamas-led Palestinian government to resolve its financial crisis very soon.
Mr. Haniyeh gave no details Sunday on how the crisis will be resolved. The government has been unable to pay the salaries of 165,000 of its employees.
But media reports say the Arab League is preparing to bypass the Hamas-led government and pay those salaries directly.
The United States and the European Union consider Hamas a terrorist group and have frozen aid until Hamas renounces violence and recognizes Israel's right to exist. Israel is withholding about $50 million in monthly tax revenues it collects for the Palestinian Authority.
Hamas' charter calls for the destruction of Israel.
Some information for this report was provided by AP and Reuters.