Israel's new coalition government, which includes a strong showing of pro-settlement hardliners, is to be sworn in on Monday just two days before a visit by US President Barack Obama.

Following more than 40 days of tortuous negotiations, Prime Minister Benjamin Netanyahu announced on Saturday that he had managed to piece together a new government with a majority of 68 within the 120-seat Knesset, or parliament.

Israel's 33rd government will be formally sworn in before parliament in a ceremony due to begin at 1300 GMT.

Despite a strong showing by the new secular centrist Yesh Atid party (19 seats), the lineup is predominantly rightwing with several key ministries handed to settler activists who have vowed to advance construction in occupied Palestinian territories.

The defence and housing ministries, both of which play central roles in approving settlement construction, have been handed to rightwing MPs with pro-settlement track records.

"The era of Ehud Barak is over. The new government will strengthen settlements in Judaea and Samaria," said incoming deputy defence minister Danny Dannon, using the biblical term for the West Bank.

Barak stepped down as defence minister last week and has been replaced by Moshe Yaalon, a former military chief of staff from Netanyahu's rightwing Likud who is strongly pro-settlement and has vocally opposed any freeze on construction.

Another key portfolio is the housing ministry, which is being turned over to Uri Ariel, an ultra-nationalist settler who is number two in Jewish Home (12 seats), another key coalition partner which is on the far-right of the political spectrum and completely opposes a Palestinian state.

Dannon, considered one of the most hawkish MPs in Likud, was quick to play down hopes of any breakthrough when Obama arrives for a three-day visit on Wednesday.

"The United States knows that there were elections in Israel and that a nationalist government was formed. We want peace but whether you look to the left or right in this region, you realise there is no partner," he said.

"There is no horizon for a political process. We are ready to negotiate without pre-conditions but I am not optimistic," said Dannon who is one of Likud's most hardline ministers.

Sources close to Yaalon were also quick to dismiss the prospect of any new gestures to the Palestinians during Obama's visit.

Speaking to public radio, they said the new defence minister was opposed to any move which would see the release of prisoners, a settlement freeze or the transfer of land to Palestinian Authority control.

Direct talks between Israel and the Palestinians have been in deep freeze for two-and-a-half years, with little prospect of them being renewed any time soon.

Despite the high-profile visit by Obama, his first since being elected president more than four years ago, the White House has been careful to play down expectations linked to peace talks.

Agreements to form the government were signed on Friday with Yesh Atid and Jewish Home agreeing to join Likud-Beitenu (31 seats), which fuses Netanyahu's Likud with the hardline Yisrael Beitenu of ex-foreign minister Avigdor Lieberman.

The centrist HaTnuah party (six seats) of Tzipi Livni is also to be part of the government, with the former foreign minister to be Israel's negotiator in talks with the Palestinians.

At the insistence of Yesh Atid the government will be the first in 29 years to exclude ultra-Orthodox parties.