Israeli Prime Minister Benjamin Netanyahu and opposition leader Shaul Mofaz have reached a surprise agreement to form a national unity government, The Haaretz newspaper reported on Tuesday.

The deal envisions that early elections, expected to be scheduled for September 4, will be canceled, and Kadima party leader Mofaz will be appointed a deputy prime minister. He is expected to join Netanyahu's government and commit to backing its policies through the end of its term at the end of 2013.

In an earlier interview with Haaretz, Mofaz, elected to head Kadima less than two weeks ago, said that should he be elected, he would not join a government led by Netanyahu.