"Peace: It's not the last goal. It's a common and enduring goal for all Israelis and all Israeli governments - mine included.
"This means I will negotiate with the Palestinian Authority for peace," he said.
"I think that the Palestinians should understand that they have in our government a partner for peace, for security and for rapid economic development of the Palestinian economy," he added.
But Mr Netanyahu gave no hint of whether or not he would support the creation of an independent Palestinian state.
Palestinian negotiators have been urging him to back the plan, embraced by international mediators, including US President Barack Obama, and more moderate Israeli leaders.
In a televised news conference on Tuesday, US President Barack Obama - who also backs Palestinian statehood - said peace efforts would not get "easier" with a Netanyahu government, but were "just as necessary".
Reacting to Mr Netanyahu's comments, senior Palestinian officials were sceptical, but said the incoming prime minister would be judged on his actions.
"As far as we're concerned an Israeli government that refuses the two-state solution and continues the settlement, will not be a partner to us," senior negotiator Saeb Erekat told the BBC.
He said the new Israeli government must be obliged to sign up to past agreements, in the same way that the Palestinian Authority was forced to after the militant Hamas movement won its legislative elections in 2006.
Mr Netanyahu's path to government was confirmed on Tuesday when Labour leader Ehud Barak agreed to join a coalition government with the Likud party.
But the defence minister's decision provoked an angry reaction from some members within the leftist party, historic opponents of Likud.
Several Labour lawmakers have said they oppose the move and would not support Mr Barak on the issue.
Labour lawmaker Sheli Yachimovich said she would struggle to vote for a government including Avigdor Leiberman, leader of the far-right Yisrael Beiteinu party.
"I assume I'll find a middle way... and simply won't participate in the vote," she said.
Fellow Knesset member Ophir Paz-Pines was even more scathing, declaring that former Labour prime ministers would be "turning in their graves".
But Mr Barak's deputy as defence minister, Matan Vilnai, told Israel Radio there was "no doubt" Labour would pull Mr Netanyahu's government towards the centre.
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