JERUSALEM (REUTERS) - Israeli Prime Minister Benjamin Netanyahu took a first step in forming a new government on Tuesday, announcing a coalition deal with former Foreign Minister Tzipi Livni and naming her to handle efforts to renew stalled diplomacy with the Palestinians.

Mr Netanyahu's choice of Ms Livni, a moderate voice for a government led by his right-wing Likud party, seemed a positive signal ahead of United States (US) President Barack Obama's visit next month on a push to resume peace talks deadlocked since 2010.

In televised remarks, Mr Netanyahu said the union with Ms Livni, a longtime rival, was intended to provide his emerging government with a "wide and stable government that unites the people".

He said he wanted to face down what he called "tremendous challenges" posed by a nuclearising Iran and the violence of neighbouring Arab revolts.

Mr Netanyahu said Israel had to "make every effort to promote a responsible peace process with the Palestinians", adding that he hoped for resumption of talks that froze after a dispute over Jewish settlement building.

Without expressly giving a title for her new diplomatic role, Mr Netanyahu said Ms Livni would become a "senior partner in the effort" to revive Middle East diplomacy. She would also become justice minister, a job Ms Livni has also held previously.

The coalition union with Ms Livni's six-member faction will likely ratchet up pressure on Israel's other fractious centrist and religious parties to come on board Netanyahu's emerging new government as well.

After winning a Jan 22 election, though short of a majority in parliament, Mr Netanyahu has another month to secure enough coalition partners to control at least half of the legislature's 120 seats so that he can govern.

Likud, running on a joint ticket with another right-wing party, won 31 seats in the vote. Ms Livni heads a small centrist party that won six.

Ms Livni, 54, said she had decided to join Mr Netanyahu's next government "because of a strategic and moral imperative to leave no stone unturned, to exhaust any possibility and become a part of any government that commits to bringing peace".

As foreign minister in 2006-2009 with the centrist Kadima party, Ms Livni headed inconclusive talks with the Palestinians.

She formed her own party last year after quitting Kadima following a lost leadership contest.

Ms Livni had rejected Mr Netanyahu's offers to join his current government formed after a 2009 election, amid disputes over policy and jobs, after her party polled the most seats though Mr Netanyahu mustered more political allies than she could.

Mr Netanyahu said they had agreed "we need to set our differences aside and overcome old rivalries and combine forces for the sake of the country".