Mr Lieberman is a controversial figure because of his views on Israeli Arabs
Israel's PM-designate has signed his first coalition deal, which could see controversial right-winger Avigdor Lieberman becoming foreign minister.
Benjamin Netanyahu of Likud struck the deal with Mr Leiberman's party Yisrael Beiteinu, which has been accused by some critics of anti-Arab racism.
But it includes a clause stressing both parties' preference for a unity cabinet which could alter the portfolios.
Mr Netanyahu has also been seeking the support of the centrist Kadima party.
If Kadima also joins the coalition line-up, party leader and current Foreign Minister Tzipi Livni could keep her position, although talks have so far proved inconclusive.
Mr Netanyahu has a deadline of 3 April to form a government in the wake of elections in February.
Ms Livni, whose party outpolled Likud by a single seat in the election but was seen as less able to build a coalition, has demanded Mr Netanyahu signs up to a two-state solution with the Palestinians before she joins the government.
Yisrael Beiteinu is a strong supporter of Israeli settlement activity in the occupied West Bank, seen as illegal under international law and a major obstacle to a peace deal.
Mr Netanyahu was prime minister in the late 1990s
It also advocates a peace deal which jettisons Israeli land populated by Arab citizens and annexes settlements in the West Bank and Mr Lieberman has proposed that Arab citizens sign loyalty oaths or lose their citizenship.
Correspondents say the designation of the former bouncer at a Moldovan nightclub as Israeli foreign minister could harm some of the country's international relations.
Mr Netanyahu also favours a revised peace formula, which concentrates on economic development of autonomous Palestinian areas rather than agreeing territorial deals with the Palestinians.
European Union foreign policy chief Javier Solana has warned Israel that it must work towards a two-state solution to maintain its current international diplomatic support.
"Let me say very clearly that the way the EU will relate to a government [of Israel] that is not committed to a two-state solution would be very different," he said at a news conference.
If Kadima sees through its stated intention to lead the opposition, Likud is expected to try to bring in smaller hard-line parties like Jewish Home, National Union and United Torah Judaism.
That would give it a solid right-wing majority of 65 in the 120-seat parliament.
The deal with Yisrael Beiteinu envisages it getting five cabinet posts.
In addition to foreign affairs Mr Leiberman would be named deputy prime minister. Other posts include the ministers of internal security, infrastructure, tourism, and the immigrants integration.