Prime Minister Benjamin Netanyahu was tasked by the Israeli president with forming a new coalition government, after talks to form a unity government fell apart.
Neither Mr Netanyahu nor his main opponent Benny Gantz looked likely to be able to form a government, with President Reuven Rivlin pushing for a unity government which would include both their parties.
Mr Netanyahu acknowledged this when he accepted the mandate from the president on Wednesday night, saying his "inability to form a government is slightly less than that of Gantz".
Last week marked the second election held in Israel in just over five months after Mr Netanyahu failed to form a coalition following his narrow victory in the April election.
The country now faces the possibility of a third election if no government can be formed.
Mr Netanyahu's party came out of last week's election with one less seat than Mr Gantz's but with the backing of one additional lawmaker, making him slightly more likely to be able to form a government - although neither candidate has the required majority of at least 61 parliament members.
Standing alongside the president, Mr Netanyahu called for the swift formation of a broad unity government, saying "national reconciliation" was needed in light of threats from Iran and the unveiling of US President Donald Trump's soon-to-be-announced peace "plan of the century".
Mr Rivlin's office announced his decision after he met for the second time this week with Mr Netanyahu, of the ruling right-wing Likud party, and the centrist Blue and White party's leader Mr Gantz.
Mr Gantz said after the announcement that he had been calling for "a broad, liberal unity government" since before the elections.
"For me, unity is not a constraint created by election results, but a real will that stems from the necessity to unite the people," Mr Gantz said.
Mr Rivlin warned that without compromise, there would be no government and stressed that "the people do not want further elections".
Mr Netanyahu now has 28 days to complete the task, with a possible two-week extension that could be granted by Mr Rivlin.
