The move expands Netanyahu's narrow 61-seat coalition
to 66 seats in the Knesset, Israel's parliament,
and it brings Avigdor Liberman
, one of the country's most controversial politicians and Netanyahu's biggest critics, into the government.
"Since the government was established a year ago, I sought time after time to widen the government," Netanyahu said Wednesday at the signing of the coalition agreement. "Israel needs a stable government in order to deal with the challenges before us, and to take advantage of the opportunities in front of us."
Netanyahu's coalition now includes all of the right-wing parties and excludes the left-wing parties.
Liberman will join the government as defense minister, replacing Moshe "Bogie" Ya'alon, who resigned
in protest at the appointment. Critics have pointed at Liberman's scant military experience.
Knesset member Benny Begin, son of former Prime Minister Menachem Begin, called it "delusional" and said it showed "a lack of responsibility toward the defense establishment and all the citizens of Israel."
Liberman is an immigrant from the former Soviet Union who lives in a West Bank settlement that many in the international community consider to be illegal, and he has a history of making controversial statements.
In March 2015, Liberman said that Arab-Israelis who are not loyal to Israel should be beheaded. "We need to pick up an ax and cut off his head," he said, speaking before the most recent elections. In 2001, he said he would bomb Egypt's Aswan Dam in the event of a war between Israel and Egypt.
Tough critic of Netanyahu
Lately, Liberman has been especially vocal in criticizing Netanyahu, calling for the Israeli leader to resign as recently as two weeks ago. In mid-April, he blasted Netanyahu's handling of security following months of violence in Israel and the West Bank. "This government does not know how to decide and is afraid to fight against terror," Liberman said.
At a party meeting in June, he ridiculed the Prime Minister, saying, "Netanyahu doesn't belong, not to the right and not to the left. He has no ideology. He is Mr. Zigzag. He may be the world champion of zigzagging. But he definitely does not belong to the nationalist camp."
Liberman's relationship with Netanyahu goes back more than 20 years. Following Netanyahu's election as Likud party leader in 1993, he made Liberman the director-general of the party. When Netanyahu was first elected Prime Minister in 1996, Liberman became director-general of the Prime Minister's office.
He split with Netanyahu a year later, starting the Yisrael Beiteinu party
in 1999. Among other roles, Liberman has also been deputy prime minister and minister of foreign affairs from 2009 to 2015 before moving to the opposition.
PLO official: 'Decision is extremely dangerous'
Liberman supports a hard line in negotiations with Palestinians for a two-state solution, insisting that any final status agreement be part of a broader deal that includes normalized relations with Arab states. He also supports populated territory swaps, exchanging Jewish settlements in the West Bank for Arab-Israeli towns within Israel.
Hanan Ashrawi, a PLO Executive Committee member, has criticized the addition of Liberman to the government.
"Such a decision is extremely dangerous -- Lieberman, who has called for the beheading of Palestinians and for their transfer outside the state of Israel, is a serious threat to peace and stability, and his appointment will generate a culture of lawlessness, extremism, violence and hate in Israel."
Even with this shift further to the right, Netanyahu insists his support for a two-state solution has not waned.
"My government remains committed to pursuing peace with the Palestinians, pursing peace with all our neighbors. My policy has not changed," he said. "We'll continue to pursue every avenue for peace, while ensuring the safety and security of our citizens.
"I believe the developments in our region have created new challenges for us all, but I also believe they 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."
Netanyahu once more called on the head of the opposition, Zionist Union leader Isaac Herzog, to join the coalition in a unity government. Herzog has refused so far.