Netanyahu has not personally been accused of wrongdoing in the so-called "submarine affair", which concerns a multi-billion shekel deal to acquire naval vessels from the German industrial giant Thyssenkrupp.

Prime Minister Naftali Bennett, who ousted Netanyahu in June, abstained in the vote setting up the inquiry, reportedly citing concerns it would interfere with the military procurement.

In tweet before cabinet approved the probe, Foreign Minister Yair Lapid called the submarine affair "the most serious security corruption case in the history of Israel.

"It is necessary to turn over every stone to reach the truth."

Defence Minister Benny Gantz was also a strong supporter of the probe.

David Shimron, Netanyahu's personal lawyer and cousin, has been charged with money laundering in connection with the 2012 procurement.

Miki Ganor, Thyssenkrupp's representative in Israel, has been charged with bribery.

The newly established commission will look at the procurement process but will not investigate defendants currently on trial.

This month, Gantz announced a separate agreement to buy three further submarines from Thyssenkrupp in a 10 billion shekel (over three billion dollar) deal.

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