Due to the stalemate produced by the elections, it was decided to form a national unity government, with the Alignment and Likud holding the leadership for two years each.

Alongside the Alignment and Likud, the coalition government included the National Religious Party, Agudat Yisrael, Shas, Morasha, Shinui and Ometz.

In accordance with the rotation agreement, Peres resigned in 1986 and Likud's Yitzhak Shamir formed the twenty-second government on 20 October 1986.

Kach was a far-right party that advocated the expulsion of most Israeli Arabs, and although it had run in previous elections, it had not passed the electoral threshold.

Nevertheless, the law was not overturned, the Supreme Court merely deciding it was impossible to determine if "the real, central and active purpose [of the PFLP] is to bring about the elimination of the State of Israel as the state of the Jewish people",[3] and attempts were made to ban the Israeli Arab parties Balad and Ta'al using the same law prior to the 2003 elections.