Israel's parliament has sworn in a new government led by Prime Minister Benjamin Netanyahu and his former rival Benny Gantz, ending the longest political crisis in the country's history.

After more than 500 days without a stable government and three inconclusive elections, lawmakers in the 120-seat Knesset approved a three-year coalition, with 73 voting for and 49 against. One member was absent.

The new government was set to confront serious crises in its first weeks, including the economic devastation wrought by the coronavirus and a looming battle over Israel's possible annexation of large parts of the occupied West Bank.

Addressing the parliament before the vote, Netanyahu said his incoming government should apply Israeli sovereignty over Jewish settlements, which are illegal under international law.

"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.

For his part, Gantz, a former military chief, made no mention of any possible annexation moves in his ensuing speech.

The two former rivals agreed to a three-year coalition government last month, after more than 500 days of political deadlock and three inconclusive elections in less than a year. Under the power-sharing agreement, Netanyahu will serve 18 months as prime minister and then hand over to Gantz.

The agenda of the new government includes a possible declaration of sovereignty over Jewish settlements and the Jordan Valley in the West Bank - a de facto annexation.

Such a move will likely cause international uproar and inflame tensions in the West Bank.

Palestinian leaders have threatened to abolish bilateral agreements with Israel if it goes ahead with the plan to annex parts of the West Bank - land they want as part of a future state - as early as July 1.

Jordan's King Abdulla II, meanwhile, warned Israel of a "massive conflict" if it went ahead with the plan, while the European Union's foreign policy chief said the bloc would use "all our diplomatic capacities" to try to dissuade the new government from going ahead with the move, approved under United States President Donald Trump's so-called Middle East plan.

Israel's new government was challenged in the Supreme Court, with opponents arguing Netanyahu was ineligible to rule due to a number of corruption indictments. They also complained that certain provisions in the coalition deal broke the law.

But the court ruled earlier this month that "there was no legal reason to prevent the formation of a government" led by Netanyahu, who denies the corruption allegations.

It added that by approving the coalition it "was not seeking to diminish the severity of the charges" against Netanyahu, but concluded that those could be handled in his trial, which is due to begin on May 24.

While Israeli law bars ministers from serving while under indictment, there is no such law for prime ministers.