The decision means that the Likud Party's Netanyahu may be prime minister for the first 18 months, and is then replaced by Gantz. The latter's Blue and White Alliance will also receive 16 out of 30 ministerial posts, Ynet writes.
President Reuben Rivlin announced last week that the country will once again run for re-election unless Parliament can agree on who will lead the country.
Israel has held three parliamentary elections in the course of a year after repeated failures to launder sufficient support for a new government.