Israeli Prime Minister Benjamin Netanyahu's chief rival said he agreed with a smaller party to work together to form a new government following national elections last week.

The announcement on Monday by Benny Gantz, leader of the Blue and White Party, dealt a new setback to Netanyahu as he struggles to hold on to power before his upcoming trial on corruption charges.

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In a statement, Gantz said he had a good meeting with Avigdor Lieberman, leader of the small Yisrael Beiteinu party.

"We discussed questions of fundamental principle and determined that we will work together to assemble a government that will pull Israel out of the political deadlock and avert a fourth round of elections," Gantz said.

In last week's election, Israel's third in less than a year, Netanyahu's Likud party emerged as the largest party. But with his smaller religious and nationalist allies, he secured only 58 seats in parliament, three short of the required 61-seat majority needed to form a new government.

Netanyahu's opponents, led by Gantz, control a majority of seats. But beyond their shared animosity towards Netanyahu, there are deep divisions between these parties, which include Lieberman's secular, ultra-nationalist party and the Arab-led Joint List.

Corruption trial

Gantz's announcement with Lieberman marked a step towards unifying those anti-Netanyahu forces, though it remains unclear whether they can reach a final agreement, much less a deal with Arab politicians.

Lieberman has, in the past, branded Arab political leaders as "terrorist" sympathisers.

"We'll continue to discuss the details, formulate our common objectives, and move forward," Gantz said.

Netanyahu is desperate to remain as prime minister as he prepares to go on trial on March 17.

He has been charged with fraud, breach of trust, and accepting bribes in connection to a series of scandals that include accepting expensive gifts from wealthy friends and offering to exchange favours with powerful media moguls.

The long-ruling Israeli leader denies any wrongdoing.

Netanyahu's lawyers requested a delay in the start of the trial, saying they need more time to review evidence. Prosecutors on Monday said they oppose any delays.

Israel's president, Reuven Rivlin, must decide by next week who to choose as the prime minister-designate.

The president typically chooses the candidate he deems has the best chance of forming a governing coalition.

Netanyahu has defiantly insisted he won last week's election and accused his opponents of trying to "steal the elections" by aligning with Arab-led parties he claimed were hostile to the state.

"I promise you, I am not going anywhere," Netanyahu said over the weekend.