Prime Minister Binyamin Netanyahu has informed the cabinet of an official offer to Yisraeli Beytenu head Avigdor Liberman to join the government.

Netanyahu told ministers Liberman has been offered the defense and aliyah and absorption ministries – two key portfolios demanded by the Yisrael Beytenu faction. Earlier, it was reported that the PM had informed current Defense Minister Moshe Yaalon of the possibility he would lose his position to Liberman.

It is not clear what new role, if any, Yaalon would take if Liberman accepts the offer. The incumbent defense minister and the prime minister have clashed over the past several days, and news that his position is about to be handed to Liberman is likely to ratchet up tensions between the two even further.

Netanyahu’s statement to the cabinet followed a meeting with Libermen, in which the two agreed on the formation of formal negotiation teams to continue talks.

The dramatic developments come in the aftermath of a press conference held earlier on Wednesday by Liberman, in which he leveled his demands for bringing his party into the government, and challenged the prime minister to contact him if indeed he was serious about talks. Apart from the defense ministry, Liberman is also demanding that the government endorse a bill requiring the death penalty for terrorist murderers, along with a number of sweeping pension reforms.

Netanyahu was quick to respond: offering Liberman a face-to-face meeting to begin the negotiation process.

That offer provoked, in turn, a response from the leader of the Zionist Union party Yitzhak Herzog, who announced that his faction would be ending all unity government talks with he Likud party, unless Netanyahu ended his overtures towards Yisrael Beytenu.

Meanwhile, Netanyahu’s shift away from the leftist Zionist Union and towards the secular-nationalist Yisrael Beytenu has been welcomed by the religious-nationalist Jewish Home party, which had threatened to bolt the coalition if Herzog’s conditions for a unity government were met.