Israeli Prime Minister Benjamin Netanyahu said the new unity government set to be sworn in Sunday should apply Israeli sovereignty over West Bank settlements.
"It's time to apply the Israeli law and write another glorious chapter in the history of Zionism," Netanyahu said on the issue of Jewish settlements in the occupied Palestinian territory.
"These territories are where the Jewish nation was born and grew," he said of the settlements.
"This measure won't distance us from peace, it will bring us closer."
Netanyahu's new unity government, agreed with retired military chief Benny Gantz, was due to be sworn in later in the day, with the agreement between the formal rivals opening the option of moving ahead with annexation.
Such a move was likely to cause international uproar and inflame tensions in the West Bank, home to nearly three million Palestinians and some 400,000 Israelis living in settlements considered illegal under international law.
In his speech, Netanyahu said there was no question that the "hundreds of thousands of our Jewish brothers in Judea and Samaria will always stay in their place as part of any final peace agreement".
Judea and Samaria is the Hebrew and biblical term used by Israel to refer to the West Bank.
Gantz made no mention of any possible annexation moves in his ensuing speech.
