TEL AVIV—Israeli´s Prime Minister Benjamin Netanyahu said a surprise move to ditch plans for early elections in favor of a national unity coalition would enable his government to serve out its term and signal to the Palestinians that he is serious about peace talks.

Meanwhile, the leader´s new ally in the unity coalition, opposition Chairman and Kadima party leader Shaul Mofaz, hinted that expanding the base of the government would help it find a consensus on how to deal with Iran´s nuclear program.

The addition of the largest party in the Israeli parliament, Kadima, greatly expands the presence of doves in the coalition and gives Mr. Netanyahu more leeway to chart his own course on foreign and domestic policy without being held hostage to hard-liners in the coalition.

"The state of Israel needs stability,´´ Mr. Netanyahu said on Tuesday at a joint news conference with Mr. Mofaz. "This will be the broadest government in Israel´s history."

The new government, which is expected to be ratified by the parliament, puts Mr. Netanyahu at the center of a coalition that controls 94 of 120 seats in the legislature.

Even though polls predicted an easy victory in September for Mr. Netanyahu, moving up elections from October 2013 was still seen as a gamble because of Israel´s volatile political system.

The deal helps Mr. Mofaz, who has had little time to establish himself as Kadima leader after unseating Tzipi Livni in March, to avoid an election that polls indicated would have resulted losses for his party and his political fortunes.

Mr. Netanyahu and Mr. Mofaz emphasized that the unity government gives them the leverage to push through crucial domestic reforms such as reducing military draft exemptions for ultra-Orthodox and overhauling Israel´s election system to bolster the staying power of coalitions.

Regarding the Palestinians, the prime minister said he and Mr. Mofaz reached a series of unspecified "understandings" on how to advance a "responsible peace process." While accusing the Palestinians of responsibility for the moribund peace process, he expressed hope his new government would spur progress.

The Palestinians said they welcomed the change in the coalition makeup, but that the new government would have to prove itself. A spokesman for President Mahmoud Abbas called on the Israeli government not to miss the new "opportunity" to revive the peace process.

A senior Palestinian official said that Israel should institute a freeze in settlement expansion and reach an understanding with the Palestinians about the ground rules for peace talks.

"We are hoping that the coalition will be in a position to come back to the negotiating table, bearing in mind that the coalition has a wide base of support,´´ said Muhammed Shtayyeh, a member of the Palestinian negotiating team.

Kadima, which led a government that negotiated with the Palestinians in 2008, will provide a counterweight to Mr. Netanyahu´s original coalition, which depended on parliament members who were ideologically opposed to any compromise.

Still, political analysts in Israel were skeptical the new government would prompt a breakthrough in the talks. The first test of Mr. Netanyahu´s unity government will come this summer when he faces a Supreme Court order to evacuate an settler outpost built on Palestinian-owned property.

Mr. Netanyahu has been trying to avoid an evacuation out of concern that it might stoke physical clashes with settlers. Political analysts suggested that one reason he turned back from the early election stemmed from concern that hard-line Jewish settlers were gradually gaining grass-roots control of his Likud Party. At the news conference, he rejected that suggestion.

Mr. Mofaz, will become a deputy prime minister and join the "octet" of government ministers who Mr. Netanyahu consults with on national- security issues.

Mr. Mofaz´s political weight as Kadima leader and his background as a former chief of staff are likely to damp criticism if the government should order a lone strike on Iran´s nuclear program in the future, analysts said.

"A unity government reduces the likelihood of criticism of the government should an operation go wrong," wrote Ron Ben Yishai, a military affairs columnist for the Ynet.com website. "It strengthens Israel´s deterrence.´´

Alluding to Israel´s posture toward Iran, Mr. Mofaz argued that a broad coalition will strengthen the government ability to deal with challenges and security threats "from all ranges.´´

"Believe me, we will do this in a manner that is even handed, gradual, and well considered,´´ he said, "while maintaining the right to defend ourselves at all times.´´

The unity government leaves an ideologically diffuse collection of small parties in the Israeli parliamentary opposition. Labor Party Leader Shelly Yachimovitch, who is expected to become the new Opposition Chairwoman, mocked the new partnership as a "fraud.´´

"What was this political move about? Ideology? A path way?´" she asked. "No it wasn´t. It was about survival.´´ (Copyright © Dow Jones & Company, Inc.) 05/09/12)