Israel's new government has been sworn in after parliament approved a cabinet list proposed by the incoming prime minister, Ehud Olmert.
Ehud Olmert has to govern with a slim majority in the Knesset
Earlier, the Mr Olmert vowed to fix the country's future borders, assuring MPs that major changes were on the way.
His plan involves withdrawal from some parts of the occupied West Bank, with or without a deal with Palestinians.
The Israeli leader has refused to hold talks with the Palestinians since militant group Hamas won elections.
Members of the Knesset, Israel's parliament, voted by 65-49 in favour of Mr Olmert's 25-strong team.
Mr Olmert, head of the Kadima party, said: "Negotiations with the Palestinian Authority is the desired basis to lead us to a peace agreement."
TOP CABINET POSITIONS
Premier: Ehud Olmert (K)
Foreign affairs/vice premier:
Tzipi Livni (K)
Defence*: Amir Peretz (L)
Transport*: Shaul Mofaz (K)
Regional development*: Shimon Peres (K)
Trade*: Eli Yishai (S)
Finance: Abraham Hirshson (K)
Interior: Ronni Bar-On (K)
Pensioner affairs: Rafi Eitan (P)
Health: Yaacov Ben Yizri (P)
Education: Yuli Tamir (L)
Public security: Avi Dichter (K)
National infrastructure: Benjamin Ben-Eliezer (L)
* And deputy prime minister
K = Kadima, L = Labour,
S = Shas, P = Pensioners
"But a Palestinian government led by a terror organisation will not be partner for negotiations," he added, referring to Hamas, which won the Palestinian parliamentary election in January.
He called the continued presence of isolated Jewish settlements in the West Bank, which is home to some two million Palestinians, a "threat to the existence of the state of Israel as a Jewish state".
Israel would therefore create "desirable" borders, drawn unilaterally, while keeping the main settlement blocs "forever an inseparable part of the state of Israel".
"The borders of Israel that will be formed in the coming years, will be significantly different than the territories under Israel's control today," Mr Olmert said
Israel occupied the West Bank during the 1967 Arab-Israeli war. Its settlements in the territory are considered illegal under international law, although Israel disputes this.
After weeks of talks the prime minister-designate has a narrow majority, with the support of just 67 members of the 120-seat Knesset.
Mr Olmert is preparing to occupy Ariel Sharon's chair for the first time
Mr Olmert was made acting prime minister after Ariel Sharon suffered a stroke on 4 January. His centrist Kadima party came out on top in a 28 March election, but without a parliamentary majority.
After being sworn in, ministers will take their seats at the Knesset's cabinet table, and Mr Olmert will occupy the prime minister's chair for the first time since Mr Sharon was incapacitated.
Earlier the Knesset session chose Dalia Itzik as its first woman speaker.
Speaking as opposition leader, Binyamin Netanyahu said the Kadima programme would only strengthen Palestinian militancy.
"There has never been a government that has given up so much ahead of time and relieves the other side of its obligations," the Likud party head said.
For their part, Palestinians take a very bleak view of the implications of Mr Olmert's policies, according to the BBC's Alan Johnston, in Gaza.
Although the new Hamas-controlled government refuses to recognise the state of Israel, Palestinian President Mahmoud Abbas continually appeals for a resumption of peace talks.
But the overwhelming view among Palestinians is that Mr Olmert is not interested in talking, our correspondent adds.