Netanyahu in unity government deal
Israeli prime minister Benjamin Netanyahu has reached an agreement with the Kadima opposition party for a unity government, cancelling an early election.
In a statement, President Shimon Peres' office said Mr Netanyahu had informed the president that he had reached a deal with the leading opposition party, Kadima, to form a broad-based coalition government.
That agreement overrides his announcement on Monday that his governing coalition would seek early elections.
The dramatic turn of events could influence any decision on a possible Israeli strike on Iran. Kadima's leader Shaul Mofaz, a former military chief and defence minister, has been a vocal critic of Israel striking Iran's nuclear sites on its own.
Media reports of a deal came as Israel's parliament held debates long into the night over whether to disperse ahead of early elections called for the autumn. Earlier, the Israeli government proposed the election be moved up to September 4. The election had originally been set for 2013.
The reports said Kadima agreed to join Mr Netanyahu's government on the condition it supported a proposal about military deferment for Ultra-Orthodox Jews. The issue was one of the main reasons Mr Netanyahu decided to bring forward the election date. The deal stipulates that Mr Mofaz will serve as deputy prime minister and that two other key parties, Yisrael Beitenu and Shas, had agreed to the move, according to the reports.
The current government is the most stable Israel has had in years. But disagreements on a variety of domestic issues such as drafting the ultra-Orthodox into the military and tearing down illegal structures in West Bank settlements have led Mr Netanyahu to move up elections by more than a year.
Recent polls have suggested his Likud Party would win at least a quarter of parliament's 120 seats to become the legislature's largest faction - putting him in a comfortable position to form a majority coalition.
They also show he might be able to form a more moderate coalition than the hawkish line-up he now heads, in partnership with centrist parties more open to making concession to the Palestinians.
The early elections have also renewed speculation that Israel might attack Iran's suspect nuclear programme, perhaps within months.