The Knesset approved by 71 votes to 23 an agreement between Prime Minister Benjamin Netanyahu and the opposition Kadima party to form Israel's seventh national unity government.
The move puts Netanyahu at the helm of one of Israel's largest ruling coalitions ever with an overwhelming 94 votes in the 120-seat Knesset, or parliament.
Immediately after the deal was approved on Wednesday, Kadima leader Shaul Mofaz was sworn in as a minister within the premier's office. He will also serve as one of Netanyahu's vice prime ministers.
The agreement between Netanyahu and Mofaz, who took over leadership of the centre-right Kadima only six weeks ago, was announced in the early hours of Tuesday.
Wednesday's vote followed a lengthy Knesset session in which lawmakers were given the opportunity to deliver short speeches on the deal, and many opposition members lambasted Mofaz for "opportunism" and "cheap politics."
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Mofaz and Netanyahu negotiated the 11th-hour deal as the Knesset was voting on a motion to end its current session to clear the way for early elections this September rather than in October 2013 as scheduled.
Under the deal, Kadima and Netanyahu's right-wing Likud will replace by the end of July a contentious law that allowed ultra-Orthodox Jews to defer their military service, with new legislation that would ensure a "fair" sharing of the burden of army service.
The deal also involves a commitment to renew the peace process, with Netanyahu saying he hoped the establishment of a new government would encourage the Palestinians back to the negotiating table after a hiatus of more than 20 months.
The deal, which caught both the political establishment and the media by surprise, is a coup not just for Netanyahu but also for Mofaz, an Iranian-born former general and armed forces chief of staff who took over Kadima following faction primaries on March 28.
Although Kadima emerged as the largest party in parliament following the 2009 elections -- taking 28 seats -- it failed to form a government, and polls have suggested it stands to lose up to half of them in any new election.