Seconds before the deadline, a statement from the Prime Minister’s Likud party announced that he had returned the mandate to form a new government to President Reuven Rivlin.
Now the president must decide which of the other political leaders in Israel to entrust the task of forming a coalition government, or whether to take some other route to achieve a breakthrough.
Lapid is a one-time finance minister who entered politics in 2012 after a successful career as a television newscaster.
But even if Lapid wins the mandate, Naftali Bennett, a former defense minister and leader of the right-wing Yamina party, is likely to be the key man in the coalition negotiations.
Although his party only won seven seats in the 120-seat Knesset, Bennett is in the exceptional position of having been offered prime ministerial positions by both Netanyahu and Lapid, who both offered him a rotation agreement and said he could go first.
So far Bennett has said he prefers a right-wing government, but he hasn’t ruled out a unity government spanning a wide range of right-to-left parties.
When asked by CNN how quickly such a unity government could be formed if Lapid were given the mandate, a negotiating person said, “As soon as Bennett wants.”
“There’s no reason it couldn’t happen in a week if he chooses to,” added the person.
Another person with knowledge of the negotiations told CNN that Bennett had to let Netanyahu’s mandate expire unsuccessfully to show that right-wing government was not possible.
“He can’t take the blame for it,” said the second person.
Benny Gantz, Israel’s current defense minister, appealed to his predecessor on Tuesday evening not to hesitate.
“Naftali Bennet, I know that you are a person of values. I know that Israel is important to you … You have to announce today that you are joining a government that is committed to change, and that you are Support the presidential mandate given to MK Yair Lapid … You are a person of values. Don’t let Netanyahu trample you, “said Gantz.
The Israeli Prime Minister had also appealed against Bennett’s values at the last minute as the mandate deadline approached. He released a clip from the Yamina leader’s election campaign stating that he would not support a government with Yair Lapid and stated, “I’m a right winger and so is it [would] contradict my values. And values are important to me. ”
“Naftali, prove you’re still a right winger,” pleaded Netanyahu’s tweet.
Israel’s fourth election in less than two years, like the previous three, was viewed primarily as a referendum on Israel’s longest-serving leader.
Netanyahu has been on trial for bribery, fraud and breach of trust allegations since last May.
He denies the charges and has used them as a rally for his right-wing base, describing the process as a witch hunt carried out by liberal elites and the media.
But his campaign was insufficient to prevent another stalled parliament, prompting the Israeli leader to try to get some unlikely bedfellows together to stay in power.
His hopes were dashed when the far-right religious Zionist party refused to be part of a government that had the support of the United Arab List, an Islamist party that had broken new ground by making it clear that it was one of Prime led government could support Minister Netanyahu.
Now that the mandate is back in his hands, the President will again consult with the parties on Wednesday before deciding on his next move, which is expected in the next few days.
Instead of giving it to an individual, he could hand over the mandate to parliament and invite each of the parliamentarians to come back to head a majority of 61 seats.
Benjamin Netanyahu will remain Israel’s Prime Minister until a new government is agreed and sworn into office.