His Likud party won March’s election but he is still trying to strike deals with other parties to gain a majority.
On Monday, former ally Avigdor Lieberman said his Yisrael Beitenu party would not join the coalition.
If one is not formed by midnight (21:00 GMT), President Reuven Rivlin will offer the chance to another party.
By late Tuesday, Mr Netanyahu had secured deals with three parties – the centrist Kulanu and two ultra-Orthodox parties, United Torah Judaism (UTJ) and Shas – giving him 53 seats in Israel’s 120-seat parliament, the Knesset.
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