Binyamin Netanyahu launched a bid to unseat the Israeli prime minister, Ariel Sharon, yesterday in a challenge that threatens to split the ruling party and cause a radical realignment of Israeli politics.

Mr Netanyahu said he will seek the leadership of the ruling Likud party ahead of a general election next year, a contest he appears likely to win with the backing of the party's dominant rightwing, which is embittered by Mr Sharon's demolition of Jewish settlements in the Gaza strip.

But Mr Sharon, who commands more support than Mr Netanyahu with the wider public, is not expected to bow out of politics without a fight and some of his supporters are urging him to launch a new political party in alliance with the Israeli left. Opinion polls suggest such an alliance would win a national election.

Mr Netanyahu, who served as prime minister from 1996 for three years, launched his challenge by accusing the prime minister of betraying Likud's core belief in Israel claiming occupied land as its own.

"Sharon abandoned the principles of the Likud and has decided to go another way - the way of the left. He is threatening to destroy the party that he built with his own hands," said Mr Netanyahu.

"The Likud needs a leader who can unite the nation and smooth the fissure developing in the country and in the party, someone who represents the party's principles, and I believe that I can do that."

The contest between the two men, who loathe each other, is shaping up to be bitter. On Monday Mr Sharon said his rival, who quit the government a week before the Gaza pullout after previously voting for withdrawal, was too weak to govern.

"Anyone who gets up and flees before disengagement, after he's supported it four times, is fleeing from responsibility," the prime minister said. "He panics and loses his wits. I've seen him that way not just one time, but many times. That's Netanyahu."

Likud is expected to hold the leadership election in November. If Mr Netanyahu wins, as opinion polls suggest, he is expected to bring down the governing coalition and force a general election in February, nine months ahead of its due date.

But while Mr Netanyahu is favoured to unseat Mr Sharon as party leader he is far from assured of being Israel's next prime minister.

Opinion polls show that Mr Netanyahu only has a clear shot at running the country if Mr Sharon can be persuaded to quit politics.

But if the prime minister were to create a new centre-right party for the next election, taking a core of prominent Likud politicians with him, he would emerge in a strong position to put together a coalition government with Labour and the third largest party in the present parliament, Shinui.

Mr Netanyahu would then struggle to form a working administration as he would have to rely on smaller far-right and religious parties for support.

Labour is already implicitly throwing its weight behind Mr Sharon in the belief that he is the party's best hope of remaining as a partner in government, as it stands little chance of winning the election.

A Labour cabinet minister, Ofir Pines Paz, said Mr Sharon had effectively broken with Likud. "[He] said he adopted the policy of the Labour party, which practically he did. He adopted the policy of the peace camp in Israel," he said.

"Our supporters feel that we have to give more credit to the government and try, really try, to see if there's a possibility to continue" in government.

But some of Mr Sharon's allies in Likud said the party would be foolish to topple its leader when he has so much public support.

"I've never before seen collective suicide committed with such joy," said a cabinet minister, Meir Shetreet.