Foreign Minister Tzipi Livni said Israel must give up considerable territory in exchange for peace with the Palestinians.
She told US Jewish leaders, "we need to give up half of the Land of Israel." The term refers to the country's biblical borders, including today's Israel, the West Bank and Gaza.
Livni and Netanyahu both claim victory in last week's election. Each hopes to be picked by President Shimon Peres to form the next government.
Netanyahu appears to have the edge, because a majority of members in the new parliament agree with his views.