BEIT-UL-MOQADDAS (Reuters) -- Interim Prime Minister Ehud Olmert received the formal nod on Thursday to form a government which he pledged would set Israel's permanent borders within four years with or without Palestinian agreement.

Hours later Jewish settlers opposed to Olmert's plans to withdraw from some West Bank land defiantly moved to expand an enclave in the town of Hebron, threatening to ignite new tensions in the hotbed of Israeli-Palestinian violence.

Using crowbars and a hammer, a group of settlers broke into a house in a Palestinian neighborhood of Hebron they said they had bought.

Palestinians denied the building had been sold.

"I have decided to ask member of Parliament Ehud Olmert to form the government," President Moshe Katsav said at a ceremony with the Kadima Party leader.

Olmert, whose centrist party came first in last week's election with 29 seats in the 120-member Parliament, replied that he hoped to form a government "which will have the broadest possible support, as quickly as possible".

He will have up to 42 days to put together a coalition.

The center-left Labor Party led by former trade union chief Amir Peretz has already agreed to a political partnership with Kadima.

Kadima will now try to woo a smattering of smaller parties and set government guidelines.

Formal coalition talks will be launched on Sunday. Negotiations could take weeks as politicians from several parties vie for the top cabinet seats.

Settlement expanded

David Wilder, a settler spokesman, said some Israeli families would move into the Hebron building overnight that the settlers had purchased.

A Palestinian security source denied the building had been legally sold.

Some settlers threw stones at Palestinians at the site, witnesses said. There were no reported injuries.

Hebron is a city holy to Jews and Muslims as the site of the biblical Abraham's tomb, and is home to 130,000 Palestinians and some 400 Jewish settlers.

Olmert has proposed removing Jewish settlers from swathes of the West Bank in the absence of peace talks with the Palestinians who installed a government this month led by the Combatant Islamc group Hamas.

Israel has sought to isolate Hamas whose charter calls for its destruction.

Under Olmert's "convergence plan", Israel would keep major settlement blocs and trace its final frontier by 2010 along a barrier it is building in the West Bank, where 240,000 Israelis live among 2.4 million Palestinians.

Palestinians condemn the plan they say would annex land and deny the viable state they seek in the West Bank and Gaza Strip, which Israel captured in the 1967 Middle East war.

In a sign of Israel's tough stance toward Hamas, Israeli security forces detained Palestinian Cabinet Minister Khaled Abu Araf at a roadblock in the occupied West Bank. He was released five hours later.

"He was held because he is not allowed to enter these areas, an army spokesman said.

"The arrest of a cabinet minister proves the falseness of Israel's arguments that it seeks peace," Palestinian cabinet spokesman Ghazi Hamad said in Gaza.

Egypt's President Hosni Mubarak called Olmert to congratulate him for being named to head a new government and the two leaders decided to meet "immediately after a government is formed" in Israel.

Egypt, the first Arab country to make peace with Israel, in a 1979 peace treaty, has long helped mediate the Israeli-Palestinian conflict and was instrumental in achieving a Cease-fire deal with Palestinian combatant groups last year.