Political sources say Mr Binyamin Netanyahu has accepted the job of finance minister after Prime Minister Ariel Sharon granted him broader control over company privatisations and new economic policies.
Former premier Mr Netanyahu, who has pressed Mr Sharon to take an even harder line against a Palestinian uprising, had originally been expected to remain foreign minister in the coalition the prime minister is forming after Likud's election victory in January.
But Mr Sharon instead offered Mr Netanyahu the finance ministry - a step down in the cabinet hierarchy.
The prime minister's office said he had intially turned it down yesterday, but after Mr Sharon's aides urged him to reconsider, Mr Netanyahu told them he would take the job only if he received expanded powers.
Outgoing Finance Minister Silvan Shalom, an ally of Mr Sharon, was named yesterday to take over as foreign minister in what was seen as a bid to sideline Mr Netanyahu.