The deal was signed after intense discussions between leaders of the two parties and only hours before the expiry of a deadline for forming the new government.
Jewish Home, which is led by Naftali Bennett, won eight seats in Israel’s March Knesset elections.
In a Thursday statement, the party confirmed the deal with Netanyahu’s Likud, noting that, according to the terms of the agreement, both the education and diaspora affairs portfolios would go to Bennett.
The party further said that the justice portfolio would go to its Knesset member, Ayelet Shaked, while the agriculture portfolio would go to Uri Ariel, another of its sitting Knesset members.
The party added that, under the deal, it would get another two cabinet posts, including that of deputy defence minister.
Additional details about the coalition agreement are expected to be unveiled next week, before members of the new government are sworn in on Wednesday.
Netanyahu’s Likud won 30 seats in the Knesset election, while Jewish Home won eight.
The Israeli premier had previously hammered out coalition deals with the centrist Kulanu Party (ten seats); the ultra-Orthodox United Torah Judaism Party (seven seats); and the Shas Party (six seats).
On March 26, Netanyahu was given 42 days to form Israel’s next government.
Netanyahu now has five Likud ministers in the new government.
Yisrael Katz, meanwhile, will retain the transport portfolio, while Moshe Yaalon will stay on as defence minister, according to Israeli media.
Reactions to Netanyahu’s incoming government have ranged from enthusiastic support to outright condemnation.
For the Palestinians, the incoming government is a cause for concern in light of stalled peace talks with Israel and the ongoing construction by the self-proclaimed Jewish state of illegal settlements on Palestinian land.
Peace talks between Palestinian and Israeli negotiators ground to a halt in early 2014 after Israel failed to honour an earlier pledge to release a group of Palestinian detainees.
In the one year since, relations between the Palestinian Authority (PA) and Israel have deteriorated markedly, especially after the West Bank-based PA signed a reconciliation deal with rival Palestinian faction Hamas.
At the time, Netanyahu had asserted that Fatah – led by PA President Mahmoud Abbas – had chosen to ally itself with Hamas, an arch-enemy of Israel.
Relations deteriorated further a few months later after the Palestinians joined a number of international organizations, including The Hague-based International Criminal Court.