Likud's Yitzhak Shamir formed the twenty-third government on 22 December 1988, including the Alignment, the National Religious Party, Shas, Agudat Yisrael and Degel HaTorah in his coalition, with 25 ministers.

In 1990 Shimon Peres tried to form an Alignment-led coalition in a move that became known as "the dirty trick", but failed to win sufficient support.

Eventually Shamir formed the twenty-fourth government on 11 June 1990, with a coalition encompassing Likud, the National Religious Party, Shas, Agudat Yisrael, Degel HaTorah, the New Liberal Party, Tehiya, Tzomet, Moledet, Unity for Peace and Immigration and Geulat Yisrael.

Tehiya, Tzomet and Moledet all left the coalition in late 1991/early 1992 in protest at Shamir's participation in the Madrid Conference.

Several defections occurred during the Knesset term; five members of Likud left to form the Party for the Advancement of the Zionist Idea.