Benny Gantz, a former Israeli general and defense minister, announced his resignation from the emergency body after failing to get a post-war plan for Gaza approved by Netanyahu, which he demanded in May.
His departure is not expected to bring down the government, a coalition including religious and ultra-nationalist parties, but it marks the first political blow to Netanyahu eight months into the Gaza war against Palestinian Hamas militants.
“Netanyahu is preventing us from progressing to a real victory. That is why we are leaving the emergency government today with a heavy heart,” Gantz said.
The Israeli premier responded within minutes, saying: "Benny, this is not the time to abandon the battle — this is the time to join forces."
On Saturday, hours after Israeli forces rescued four hostages from Gaza, Netanyahu had urged Gantz not to resign.
Gantz, who turned 65 on Sunday, has been seen as a favourite to form a coalition in the event that Netanyahu’s government is brought down and early elections are called.
His centrist National Union Party submitted a bill last week to dissolve the Knesset, Israel’s parliament, and hold early elections.
The former army chief, one of Netanyahu’s main rivals before joining the war cabinet, had repeatedly called on Israel to reach a deal to secure the release of all hostages and to make it a "priority".
Though Netanyahu’s government is not under any threat of collapsing, Gantz’s leaving does make it lose the only “moderate element” that was in the overall coalition, she said.
“Netanyahu will be left just with the far right ministers, and it’s yet to be seen what role they will play.”
One of them, National Security Minister Itamar Ben Gvir, immediately demanded to enter the war cabinet in place of Gantz.
Netanyahu is also under growing pressure from his far-right coalition allies, who have threatened to quit the government if he goes ahead with a hostage release deal outlined by US President Joe Biden last month.
Ben Gvir and Finance Minister Bezalel Smotrich have insisted that the government should not enter into any deal and continue the war until the end goal of destroying Hamas has been achieved.
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