Israel’s embattled prime minister Benjamin Netanyahu has been forced to deny reports that he had agreed to call early elections, as his government faces collapse amid reports that more members of his ruling coalition had resigned.

Emerging from crisis talks with Naftali Bennett, the country’s far-right education minister and key coalition member, on Friday afternoon, it was announced that the prime minister will assume the role of defence minister.

On Wednesday, defence minister Avigdor Lieberman resigned from government over a ceasefire deal for Gaza. Mr Lieberman took his party with him, and the five crucial parliamentary seats of his Yisrael Beiteinu party, leaving Mr Netanyahu with a single seat majority in parliament.

Mr Bennett had coveted the defence role for himself, and a source close to the leader of the Jewish Home party said that after his meeting with Mr Netanyahu “it became clear ... there was a need to go to elections as soon as possible with no possibility of continuing the current government.”

After the meeting with Mr Bennett, the premier then spoke by phone with the rest of his coalition partners, urging them to “make every effort not to bring down the right-wing government” and to prevent the left from getting into power, the spokesman said.

An election date would be decided on Sunday, the source close to Mr Bennett said.

Mr Bennet’s religious nationalist Jewish Home party had said on Thursday that should Mr Netanyahu not give their leader the defence portfolio they would quit the alliance, meaning the coalition would lose eight more seats

“The prime minister told minister Bennett that rumours that a decision has been made to go to elections are not correct,” Mr Netanyahu’s spokesman said in a statement.

“Prime Minister Netanyahu emphasised the importance of making every effort to preserve the right-wing government.”

But the statement was issued shortly after a source close to Mr Bennett said the two had agreed that “it would be senseless to continue” within the same coalition.

Israeli defence minister Avigdor Lieberman arriving at the Knesset on Wednesday (AFP/Getty)

“They will set a date for elections when they meet with the [other] coalition partners on Sunday,” that source had said.

Another source said that Mr Bennett wanted a vote “as soon as possible”.

The prime minister had previously said that a one-seat majority coalition would leave an “unstable” government. But it remains unclear if Mr Netanyahu was able to convince his rival to stay on board.

The premier has faced mounting criticism in Israel over a decision to agree to a ceasefire with armed factions in Gaza after the worst flare up of cross-border violence since the 2014 war.

Fighting erupted after a botched Israeli intelligence raid into south Gaza last weekend turned into a firefight which left seven Palestinians, including a Hamas commander, and an Israeli lieutenant colonel dead.

In just 24 hours, Gaza militants fired more than 460 rockets into southern Israel: the heaviest bombardment in the last four years.

Israel responded to the rocket fire by striking more than 160 targets in Gaza, sparking fears both sides were on the brink of a new war.

On Tuesday the militants announced an Egypt-brokered ceasefire, which was met with dismay by many factions in Israel who called for tougher action against Hamas.

Mr Lieberman quit after refusing an end to the strikes on Gaza saying a truce at that moment would be “capitulating to terror”.

Hundreds of Israelis took to the streets in protest in Sderot, an Israeli border town which suffered the heaviest rocket fire but had actually voted for Netanyahu’s Likud party during the last elections.

Dozens of rockets being fired from Gaza at Israeli civilians

On Thursday in Tel Aviv hundreds more protested against the truce, which, together with Mr Lieberman’s resignation, was celebrated by Gaza as a victory.

Mr Netanyahu was left in an impossible bind. Israel is loath to initiate a fresh war as it faces a potential conflict on its southern borders with Lebanese militant group Hezbollah and Iranian factions within Syria.

In the last war in 2014, 65 Israeli soldiers were killed, the army’s heaviest losses in a Gaza conflict.

In a speech on Thursday, Mr Bennett did not reiterate the resignation threat but made his case for why he should get the defence post.

“The most dangerous thing for the state of Israel is that we begin to think that there is no solution to terrorism, to terrorists, to missiles,” he said.