The composition of Netanyahu's coalition marks a new shift to the right for the government by giving increased prominence to Naftali Bennett's nationalist-religious Jewish Home party.
With only 30 seats, Netanyahu’s Likud party now has a one-seat majority in the 120-seat Knesset.
Apart from Likud and Jewish Home, with eight seats, the coalition consists of Shas with seven seats, Kulanu with 10 seats and the United Torah Judaism, six seats, bringing the total to 61.
Palestinian reactions are negative.
“This is not a very promising government because it is a right-wing coalition between fundamentalist and racist groups,” Zuhair Sanduka, director of International Parliamentary Affairs Department of the Palestine National Council told RFI.
“There is now no future for any negotiations or peace talks with such a government, especially since they stress they will continue the same policies of confiscating land, building more settlements and issuing racist resolutions.".
But not everyone is disappointed.
“Any government that has a majority from the right of centre parties is fine with me,” says Yisrael Medad, a settler in the Shiloh Settlement on the West Bank.
Medad came to Israel 40 years ago and has lived in Shiloh since 1981. He is not worried about the one seat- majority of the coalition.
“We had governments like this in the past. Politics is the art of the possible,” he says. “Mr Netanyahu has proven that he is quite able to make political surprises, both negatively and positively, and I hope at least this government will give us a chance to push through what I would call nationalist or right-of-centre agenda items.”
Governments with a minimal majority are not necessarily still-born and analysts think partners have an extra incentive to keep the coalition together.
“We know from Israeli history that a small government tends to be even more stable than a larger government,” says Abraham Diskin, a political scientist with the Hebrew University. “Metaphorically, each of the components of the coalition has a gun in his hand with only a single bullet. And if you use the gun, it equals suicide. Because there is really no alternative government that can be formed.”
Meanwhile, critics say that the political shift to the right may annul reforms bringing ultra-orthodox Jews into mainstream life.
Exemptions from military service were granted to the ultra-Orthodox when Israel was created in 1948, to allow them time for religious study.
But their numbers grew and now they now make up about 10 per cent of Israel’s 8.3 million population.
Last year the Knesset passed a law ending exemptions from military service.
But an ultra-orthodox segment within the coalition does not necessarily put the clock back.
“Maybe the fact that they are not going to feel an antagonism against the government will make it even easier for people to connect to whatever programme is out there,” says Tamar El Or, an anthropologist with the Hebrew University.
“It is a social movement, and social movements take time. The rabbis are not brave enough to encourage that in a very outspoken or public address, it happens because, very simply, people can not live like this any more.”