In the weeks since he was chosen to form Israel's next government, Benjamin Netanyahu has labored to dispel the perception that he's on a collision course with the country's most powerful ally.

Never mind his history of spats with Washington, or that he refuses to embrace the goal of an independent Palestinian state, a cornerstone of American policy reaffirmed by President Obama last week.co

And never mind that religious parties in his coalition call for expanding the Jewish settlements in the West Bank that Obama has criticized. Or that his foreign minister lives in one.

Netanyahu, expected to be sworn in as prime minister today, speaks with utter confidence that none of this record matters. He claims that Obama, with whom he has met twice, is "open to new ideas" -- including his ideas -- on how to address the region's conflicts.

How much common ground Netanyahu can find with Obama will help define whether it's possible to advance toward Middle East peace in the coming years. Israel's alliance with the United States has endured a history of policy disputes, often rooted in the chemistry between the countries' top leaders. Netanyahu's previous turn as prime minister was no exception.

Aides to Netanyahu say the incoming prime minister's right-wing ideology has been tempered by lessons learned when he led a narrow, hawkish coalition government in the 1990s and clashed with President Clinton, who reportedly found him arrogant.

As he formed his coalition this time, Netanyahu softened his hawkish tone, telling parliament Monday that he would do his "utmost to achieve a just and lasting peace with all our neighbors." He also brought the left-leaning Labor Party into his government, reducing the clout of right-wing and religious parties and giving him room to compromise in his dealings with Washington and the Arab world.

"Netanyahu 2009 is very pragmatic. He puts Israel's interests first, but he does not ignore that one of those most important interests is the close relationship with the United States," said Zalman Shoval, a former ambassador to Washington who advises the prime minister-designate.

The new U.S. administration is equally pragmatic, Shoval said, "and realizes it can have a partner who, no less than they, wants to succeed."

Netanyahu, 59, spent part of his youth in Philadelphia, got a master's degree from the Massachusetts Institute of Technology and speaks flawless English. But Americans found him to be a difficult partner in his first term.

He sought to delay or undermine the 1993 Oslo peace accords between Israel and the Palestinians. Later, under pressure from Washington, he met with Palestinian leader Yasser Arafat and agreed to share the volatile West Bank city of Hebron. But his coalition partners rebelled, bringing down his government in 1999 after three years in office.

Netanyahu's comeback in Israel's Feb. 10 election followed a decade in which his successors made two failed attempts to negotiate a statehood accord with the Palestinians and withdrew unilaterally from the Gaza Strip.

Netanyahu opposed all three moves. His credibility at home grew as Hamas rockets rained on Israel from Gaza, just as he had predicted, and Israelis soured on the pros- pects for peace. Voters gave a collection of right-wing groups, led by his Likud Party, an ample majority in parliament.

Netanyahu says Israel's top priority now is stopping Iran's nuclear program and what he sees as its ambition to dominate the region. Weakening Iran, he says, will diminish threats from Hamas in Gaza and Hezbollah in Lebanon and make it easier to forge peace with the U.S.-backed Palestinian Authority in the West Bank.

He has assured U.S. officials that he plans to continue talks with the Palestinian Authority, but will refocus them on building Palestinian institutions and the West Bank economy.

"Economic development doesn't solve problems, but it mitigates them, and makes a stronger partner on the other side," he said during the campaign.

Netanyahu wants time to prove that he can improve Palestinians' lives in the West Bank and, by example, undermine popular support for Hamas rule in Gaza. He says his plans for industrial zones can bring 10% annual growth to the West Bank without an Israeli withdrawal.

But critics say Netanyahu cannot achieve that target without persuading the military to remove hundreds of checkpoints throughout the West Bank, and without halting the spread of Jewish settlements that the military is there to protect. Outgoing Prime Minister Ehud Olmert also promised to do both -- and failed.

The Obama administration wants a freeze on settlement growth, a line that points to a serious potential conflict. Netanyahu's coalition includes the ultranationalist Israel Is Our Home party, which agreed to join his government in return for the promise of 3,000 new homes in the West Bank and the appointment of its leader, Avigdor Lieberman, as Israel's foreign minister.

"The Obama administration is not looking to pick a fight with Netanyahu, but they need to reach an understanding very early on about settlements," said David Makovsky, a senior fellow and director of the Washington Institute's Project on the Middle East Peace Process. "It's so big of an issue that if it festers it's bound to create ill will."

Obama said last week that progress toward the creation of a Palestinian state was "critical" to ending an "unsustainable" situation of conflict. Yet it remains to be seen how hard his administration will push to continue the fruitless round of talks on borders, Palestinian refugees and rival claims to Jerusalem that began 16 months ago.

Netanyahu now says he is willing to give the Palestinians all the powers needed to govern themselves, but not a military or other sovereign attributes that could endanger Israel's security, such as control of the borders, airspace and electromagnetic frequencies.

Palestinian Authority leaders reject this approach. Unless Netanyahu explicitly accepts the goal of a Palestinian state, contacts will be broken off and "this region will go Bin Laden's way," warned Palestinian negotiator Saeb Erekat.

For now, many analysts expect Netanyahu and Obama to feel their way slowly as Washington refines its Middle East agenda.

Netanyahu will have "a period of grace," said Eran Lerman, a retired Israeli intelligence officer who is executive director of the American Jewish Committee's office in Israel. "There will be a good deal of time spent in the early stages in trying to map out areas of common understanding."

The Obama administration is still weighing the prospects for a breakthrough in the Israeli-Palestinian conflict alongside incentives to pry Syria away from its alliance with Iran and militant Islamic groups Hamas and Hezbollah. It is also in the early stages of testing the possibility of diplomatic engagement with Iran.

There is a belief that instead of focusing on the two-state solution, Washington will press for a broad regional peace accord, or at least a deal that would return the Israeli-occupied Golan Heights to Syria. In his previous term in office, Netanyahu explored the possibility of such a deal with Syria.

And seeking to ease relations with Washington, Netanyahu has made it clear that he, not Lieberman, will make foreign policy. Last week he sealed a pact with the Labor Party that will allow its leader, Ehud Barak, to remain defense minister. As prime minister in 2000, Barak engaged in U.S.-brokered peace talks with Arafat that eventually failed.

Netanyahu served in Barak's elite commando unit in the 1970s, and the two get along well. Barak supports such U.S. interests as an engagement with Syria and a cease-fire with Hamas.

But Barak reinforces a view that could lead Netanyahu to a clash with Washington. The two former commandos share a conviction that Iran's nuclear program and regional ambitions pose an existential threat that could well prompt Israel to take military action if diplomacy fails.