Israel's long-standing Prime Minister Benjamin Netanyahu has said he cannot form a government, handing the opportunity to his political rival.
Mr Netanyahu has been in power for the past decade but was unable to secure a majority after September's elections failed to produce a clear winner.
His rival Benny Gantz of the Blue and White party will now be invited to attempt to form a government.
Mr Netanyahu's attempts to bring Mr Gantz's party into government failed.
Announcing the decision to abandon his efforts, Mr Netanyahu said he had tried repeatedly to form a coalition government but had been rebuffed.
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Israel's president, Reuven Rivlin, said he would give Mr Gantz 28 days to carry out the same negotiations.
Israeli Arab lawmakers pledged their backing, but Mr Gantz - who leads a right-of-centre alliance- remained more than a dozen seats short of the necessary 61 seat majority.
President Rivlin said he would try to avoid calling another election in a country which had already voted in two this year. If Mr Gantz also fails, the parliament could put forward a third candidate in a final bid to avoid another poll.
September's poll saw Mr Netanyahu's Likud party win 32 seats and Mr Gantz's Blue and White party 33. President Rivlin initially selected Mr Netanyahu, the incumbent, as the candidate with the best chance of successfully forming a coalition.
Reacting to Mr Netanyahu's message, Blue and White said: "The time for spin is over and it's now time for action".
Israel's president has suggested a so-called unity coalition of the two main parties. That arrangement could see Mr Gantz as de facto prime minister, while Mr Netanyahu holds onto the position in name only.
Mr Gantz is a former head of the Israeli military, and served in that role while Mr Netanyahu was prime minster. He was propelled to political leadership after forming his party in February, saying that the country had "lost its way".
Mr Netanyahu has far more frontline political experience, but is facing his own battle over corruption. While trying to negotiate his coalition in October, he also attended hearings with the attorney general, who will decide whether or not to charge Mr Netanyahu in indictments for bribery, fraud, and breach of trust.
BBC
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