Israeli Foreign Minister Tsipi Livni’s Kadima Party has signed a draft coalition deal with its Labour counterparts, bringing her a step closer to becoming Prime Minister.
A deal with Labour – led by former Prime Minister Ehud Barak – would give Livni almost 50 of the 61 Knesset seats she needs to form the next government.
But she is still short of a workable majority and needs to persuade smaller parties to join the coalition.
Both Labour and Kadima say they will continue to pursue peace talks with the Palestinians.
But others, like the Jewish ultra-orthodox Shas, say there must be no negotiations over the status of Jerusalem.
The Palestinians want east Jerusalem – occupied by Israel since 1967 – to be the capital of a future Palestinian state.
However, Israelis consider it to be their own undivided city.
Livni has until November to form a government otherwise an election must be held – which polls suggest would be won by the right-wing Likud Party.