Israel's new Prime Minister Benjamin Netanyahu on Wednesday morning began the first day of his second term, vowing to dive into business immediately.

The Likud party chief took over the premiership from Ehud Olmert at a hand-over ceremony at President Shimon Peres' official residence in Jerusalem, hours after he was sworn in at a late night parliamentary session.

"We will have to roll up our sleeves and get to work immediately," said Netanyahu, broadcast live on Israeli TV Channel 22.

He admitted that his government faces many challenges, at the hand-over occasion also attended by his ministers.

In his last speech as prime minister, Olmert said, "I failed to achieve my dream of reaching peace with our neighbors," while expressing confidence that it was possible to reach a peace agreement with Syria and the Palestinians.

For his part, Peres urged the Netanyahu administration to work for peace. "Alongside strengthening Israel's security, the government, headed by you, must invest the utmost efforts into promoting the peace process on every front," he said to the new premier.

Following hours of debate, Israel's parliament late Tuesday night sworn in the Netanyahu-led 32nd Israeli government, which contains 30 ministers, marking one of the largest in the Jewish state's 61-year history.