Following his November 1 election win, Netanyahu secured a mandate to form a government backed by ultra-Orthodox Jewish parties and an extreme-right bloc.

Netanyahu will present what analysts have said will be the most right-wing government in Israel's history to parliament on Thursday.

On Tuesday, lawmakers passed legislation that now allows anyone convicted of offences but not given a custodial sentence to serve as a minister.

Before the law was passed, there had been uncertainty over whether Aryeh Deri, a key ally from the ultra-Orthodox Shas party, would be able to serve as he had previously pleaded guilty to tax offences.

A second law passed allows for two ministers to serve in the same office, a measure targeting the defence portfolio.

Bezalel Smotrich, leader of the extreme-right formation Religious Zionism, is to be the minister with control over civil affairs in the occupied West Bank -- a responsibility usually falling to the defence minister, who has yet to be announced.

The Knesset also voted to expand the powers of the national security minister, a portfolio set to be handed to Itamar Ben Gvir, another extreme-right figure.

The morning session also saw Netanyahu ally Yariv Levin resign as interim speaker of the Knesset, ahead of his expected appointment to a ministry.

Rules require that he had not been in the speaker's post for 48 hours before any ministerial appointment.

Netanyahu, who is fighting corruption allegations in court, has already served as premier longer than anyone in Israel, including a 1996 to 1999 stint and a record 12-year tenure from 2009 to 2021.

His incoming government has sparked fears of a military escalation in the West Bank amid the worst violence in the Israeli-occupied Palestinian territory for nearly 20 years.

Late Tuesday, outgoing Defence Minister Benny Gantz expressed "fear" over the "extremist direction" of the incoming government, which he said could harm Israel's security.

"I think that if the government acts in an irresponsible way, it could cause a security escalation," he said in an interview with Channel 12 television.