TEL AVIV—Prime Minister Benjamin Netanyahu reached an 11th-hour deal to form a national unity government with the main opposition Kadima party, canceling plans to dissolve parliament and hold early elections four months from now.

Tuesday´s predawn deal would bolster the stability of Mr. Netanyahu´s government and allow it to serve out the remainder of its term until October 2013 by bringing opposition leader Shaul Mofaz into the cabinet as a deputy prime minister and a minister without portfolio.

Adding Kadima into the government would add a dovish counterweight to Mr. Netanyahu´s hard-line coalition, making him less dependent on the votes of Jewish settlers and give him more political leeway to push for renewing peace talks with the Palestinians.

Noga Katz, a spokeswoman for Mr. Netanyahu´s Likud Party, confirmed the deal was finalized early Tuesday morning.

Just a few hours earlier on Monday evening, Mr. Netanyahu´s Likud Party was pushing legislation to a final vote that would have set Sept. 4 as the new election date from 2013.

Mr. Netanyahu on Monday defended his decision to seek early elections as an unavoidable step that would avoid increasing political instability and populist "extortion" by coalition partners as the government headed into the final months of its term.

Bringing Kadima into the government will boost Mr. Netanyahu´s coalition majority by 28 seats on top of its existing 66 in the 120- seat parliament.

Israeli media said Messrs. Netanyahu and Mofaz agreed to push through legislation to end exemptions from compulsory military service for ultra-Orthodox students, a proposal that had outraged religious parties and sown infighting in the coalition.

Opinion polls in recent days showed Mr. Netanyahu´s Likud Party with a commanding lead over a fractured field of parliamentary rivals, but early elections still would have involved a political gamble because of the volatile nature of Israel politics.

Mr. Mofaz, the recently elected leader of Kadima Party, on the other hand, will benefit from avoiding the early vote because opinion polls forecast that his party was poised to lose more than half of its seats in parliament.

A version of this article appeared May 8, 2012, on page A10 in some U.S. editions of The Wall Street Journal, with the headline: Israel Ends Plan for Early Polls. (Copyright © Dow Jones & Company, Inc.) 05/08/12)