Baz Ratner / Reuters Israel's Prime Minister Benjamin Netanyahu (L) and Defence Minister Moshe Yaalon attend a briefing at the Israeli army's Home Front Command base in Ramle near Tel Aviv, Israel June 2, 2015.

Israel's defense minister resigned on Friday, saying the nation was being taken over by "extremist and dangerous elements" after Prime Minister Benjamin Netanyahu moved to replace him with a far-right politician in an effort to strengthen his coalition.

Political sources say Netanyahu has offered long-time rival Avigdor Lieberman the defense portfolio, a post crucial for a country on a perennial war footing. The Defence Ministry also runs civil affairs in the occupied West Bank, where Palestinians struggling for statehood live in friction with Jewish settlers.

"To my great regret, I have recently found myself in difficult disputes over matters of principle and professionalism with the prime minister, a number of cabinet members and some lawmakers," outgoing Defence Minister Moshe Yaalon said, reading, grim-faced, from a statement at his Tel Aviv office.

"The State of Israel is patient and tolerant toward the weak among it and minorities ... But to my great regret extremist and dangerous elements have overrun Israel as well as the Likud party, shaking up our home and threatening harm to those in it," he said, hinting he might quit the ruling party.

"In the future I will return to contend for Israel's national leadership," he said.

Netanyahu rebuffed Yaalon's criticism.

"The reshuffle in portfolios did not result from a crisis in faith between us. It resulted from the need to expand the government so as to bring stability to the State of Israel given the great challenges it faces," he said in a video statement.

Netanyahu, who doubles as foreign minister, added that he had offered the top diplomatic post to Yaalon but was refused.

"I reckon that had (he) not been asked to leave the Defence Ministry, he would not have quit," Netanyahu said, defending the Likud as a "liberal nationalist party" and arguing that a broader government could better pursue a peace strategy.

However, Yaalon's departure could put a new dent in domestic and Western confidence in the Netanyahu government.

U.S. COMMITMENT "ABSOLUTE"

A former chief of Israel's armed forces, Yaalon had shored up relations with the Pentagon that provided a counter-weight to Netanyahu's policy feuds with U.S. President Barack Obama over peace talks with the Palestinians and Iran's nuclear program.

By contrast, Lieberman - whose appointment has not yet been confirmed - is inexperienced militarily and famed for his past hawkish talk against Palestinians, Israel's Arab minority and Egypt - an important regional security partner for Israel.

An Egyptian official told Reuters on Thursday that Cairo was "shocked" at the prospect of Lieberman as Israeli defense minister.

Washington struck a more optimistic note on Friday. While praising Yaalon, U.S. State Department spokesman John Kirby said Washington looked forward to working with his successor.

"Our bonds of friendship are unbreakable and our commitment to the security of Israel remains absolute," he added.

Netanyahu's offer of Yaalon's cabinet post to Lieberman emerged this week after talks failed on bringing center-left opposition leader Isaac Herzog into the government.

The inclusion of Lieberman's Yisrael Beitenu party in the coalition, which has also yet to be confirmed, would give Netanyahu's six-party coalition 67 of parliament's 120 seats, up from its current razor-thin majority of 61.

(Additional reporting by Lesley Wroughton in Brussels; Writing by Dan Williams; editing by Gareth Jones)