Israel's Opposition parties on Thursday set the wheels in motion for a potential national unity government after clinching a last-minute agreement to oust Benjamin Netanyahu, the longest-serving prime minister in the Jewish nation's history.

Yair Lapid, leader of the centrist Yesh Atid party, announced an eight-party coalition had been formed after tough political negotiations.

Under a rotation arrangement, the head of the right-wing Yamina party, Naftali Bennett, 49, would serve as the prime minister first before handing over to Lapid.

Lapid, 57, officially informed President Reuven Rivlin and Knesset (Parliament) Speaker Yariv Levin about the deal late Wednesday night, barely half an hour before the Wednesday midnight deadline.

The announcement came after a series of back-to-back meetings with the leaders of the anti-Netanyahu camp in the 120-member Knesset.

"In accordance with Clause 13(b) of the Basic Law: The Government – I am honoured to inform you that I have succeeded in forming a government...MK (Member of Knesset) Naftali Bennett will serve as a prime minister first,” Lapid told Rivlin. 

"I commit to you Mr President that this government will work to serve all the citizens of Israel including those who aren't members of it, will respect those who oppose it and do everything in its power to unite all parts of Israeli society," the Yesh Atid party leader said.

Lapid will serve as foreign minister until the two men swap roles halfway through the term. There still needs to be a parliamentary vote before the government is sworn in.

The Israeli president thanked Lapid saying, "We expect the Knesset will convene as soon as possible to ratify the government, as required.”

The development, seen by some as historic as it includes an Arab party in the coalition, will break an ongoing political impasse that has seen Israel go through four polls yielding inconclusive results in less than two years.