Avigdor Lieberman's hard-line party joins Israeli Prime Minister Benjamin Netanyahu's coalition government.
Prime Minister Benjamin Netanyahu and Avigdor Lieberman have signed a coalition agreement paving the way for the ultranationalist politician to become the new defence chief.
With the deal signed on Wednesday, Netanyahu will have a government of 66 legislators, widening his current one-seat majority in the 120-member parliament, a goal the Israeli leader has said he has sought since winning a fourth term last year.
The deal was reached after a late night meeting on Tuesday, Lieberman's spokesman said.
Over three decades, Lieberman has at times been Netanyahu's closest ally and other times a fierce rival.
The party of Lieberman, a former foreign minister, has hard-right policies on a variety of topics, most particularly his opposition to peace talks with Palestinians and support for settlers in occupied territories.
Lieberman is one of Israel's most polarising politicians and has a reputation for making inflammatory statements.
The Palestinian president's adviser promptly denounced the appointment, saying Lieberman was a "fascist minister" who will promote settlements.
In a joint signing ceremony in Jerusalem, Netanyahu and Lieberman insisted they have put their past differences behind them and sought to soothe fears over their new alliance by making calming statements in both Hebrew and English.
"I am committed to promoting the peace process. I am committed to make every effort to reach an agreement," Netanyahu said, noting that developments in the region have created new opportunities for peace.
"I intend to seize those opportunities. A broader government, a more stable government will make it easier to do so," he added.
Lieberman left a political alliance with Netanyahu in 2014, arguing that the prime minister's response to attacks out of the Gaza Strip were not muscular enough.
According to the deal, the government agreed to allocate approximately 1.4bn shekels ($363m) to pensions of elderly Israelis, including immigrants from the former Soviet Union, Lieberman's largest support base.
Netanyahu has sought to ease fears over Lieberman's appointment, saying he will continue to seek peace with Palestinians and oversee the defence ministry's policies, which include control over the occupied West Bank.
The deal closes a tumultuous week in Israeli politics. Moshe Yaalon, the defence minister, suddenly resigned last week after Netanyahu reportedly offered his post to Lieberman.
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