The new Israeli Prime Minister, Ariel Sharon, has called for parties across the political spectrum to "join hands in the national struggle for security".
Mr Sharon was sworn in as prime minister after the Knesset voted 72-21 in favour of his national unity government.
US President George W Bush was swift to offer congratulations and said he would welcome Mr Sharon at the White House on 20 March for a "working visit".
Palestinian spokeswoman Hanan Ashrawi, on the other hand, greeted the swearing-in of Mr Sharon with unconcealed dismay.
"We don't expect to see any
progress on the peace front, and I hold no hopes for this
government," she said.
'Side by side'
In an address to parliament, Mr Sharon said that Israel and the Palestinians were "fated to live side by side in this small part of the world".
He said he would work towards peace, but this would involve painful compromises for both sides.
I believe we can, if there is a will on both sides, take a
detour from the bitter path of blood
Prime Minister Ariel Sharon
"I believe we can, if there is a will on both sides, take a
detour from the bitter path of blood in which we are marching.
Our hand is extended in peace," Mr Sharon said.
The prime minister also warned Palestinians that Israel would not negotiate "under the pressure of terrorism and violence" and said that Israel had "to be prepared to use force as appropriate".
He said that there would be no new Israeli settlements established in the West Bank or Gaza Strip during this parliament, which is scheduled to run until 2003.
The veteran right-winger was elected by a landslide one month and a day ago, and has since then woven together a coalition of seven parties controlling at least 70 of the 120 Knesset seats.
In addition to Mr Sharon's own right-wing Likud party, the government will include the centre-left Labour party, the ultra-Orthodox Shas party, and a range of smaller centre-right and far-right parties.
The BBC's Hilary Andersson in Jerusalem says it is a government of "immense contradictions".
Labour's Shimon Peres, the new foreign minister, has said that negotiations with the Palestinians must continue despite ongoing violence - which is in direct contrast to Mr Sharon's own position.
With 26 ministers and 15 deputy ministers in the new government, it will be the largest in Israel's history.
Israeli press reports say a new horseshoe-shaped government table has had to be installed on the Knesset floor, at a cost of nearly $10,000.
Shimon Peres (foreign affairs)
Binyamin Ben Eliezer (defence)
Limor Livnat (education)
Tzahi Hanegbi (environment)
Eli Yishai (interior)
Asher Ohana (religious affairs)
Eli Suissa (Jerusalem affairs)
Avigdor Lieberman (Infrastructure)
Natan Sharansky (housing)
Among its first orders of business will be to pass a budget, and each party will be fighting for its own special interests.
A parliamentary vote on Wednesday may help improve matters in the next parliament.
Legislators voted to repeal the system of direct election of the prime minister and reinstate the system of voting for a party.
Under the direct-election system, voters could split their ballots, voting for a major-party candidate for prime minister, but backing a special-interest party for parliament.
Changing to a system where voters can only choose a party may discourage people from voting for small factions that might not have enough support to win any seats.
More attacks promised
The new prime minister has promised to restore security after five months of Israeli-Palestinian bloodletting - which arose from Palestinian frustration about the peace process, but which many blame Mr Sharon himself for triggering.
Palestinian militants have vowed to oppose the new prime minister - whom they view as a "butcher" - with more suicide bombings.
An advisor to Mr Sharon, Zalman Shoval, told the BBC that the new government would take "a harder line" with the Palestinians.
"That's what most Israelis expect us to do", he said.
More than 400 people have died in nearly six months of conflict between Israel and the Palestinians, most of them Palestinian.