Israel's opposition Labour party announced on Friday that its members have elected a new leader -- former government minister Isaac Herzog -- seen as more open to joining the right-leaning ruling coalition.

Herzog defeated incumbent Shelly Yachimovich with 58.5 percent of the vote in Thursday's election among the party's some 55,000 members, official results showed.

Herzog's victory could affect the make-up of rightwing Prime Minister Benjamin Netanyahu's ruling coalition, with the new Labour leader reportedly more favourable towards joining the government than his predecessor.

Earlier this month, Justice Minister Tzipi Livni, who is also Israel's chief negotiator with the Palestinians, urged Labour to join the coalition, as the government struggles with internal squabbles over the peace talks.

Some ultra-nationalist members of the coalition completely oppose the creation of a Palestinian state, and refuse to make concessions on Israeli settlement expansion in the occupied West Bank.

Herzog thanked his supporters in an address to a party meeting in Tel Aviv, saying it was "time for Labour to uphold once again its social values and (support for peace) negotiations."

"The State of Israel is in an historic phase and the ongoing peace process can achieve results with courageous gestures," Herzog said.

But he added: "I have doubts that the prime minister understands this," in reference to Netanyahu's hawkish stance on the talks.

Netanyahu refuses to accede to the Palestinians' demand that negotiations on the borders of their future state be based on the lines that existed before Israel occupied the West Bank in the Six Day War of 1967.

Yachimovich, 54, a former television journalist, had won the Labour leadership in 2011, but her popularity declined after she led the party to a disappointing result in last year's general election.

Yachimovich pledged to support the new leader, in a message on her Facebook page.

"I will cooperate with (Herzog) and help him to strengthen Labour as an alternative to Netanyahu's politically and economically rightwing government," she wrote.

Turnout among the party membership in Thursday's leadership election was just 52.7 percent, a sharp drop from the 66 percent who voted in 2011.

The more experienced Herzog, 53, has held several cabinet portfolios when Labour has taken part in ruling coalitions in the past.

A lawyer by training, he served as government secretary when Labour's Ehud Barak was prime minister between 1999 and 2001 and has been a member of parliament since 2003.

Herzog's illustrious family tree includes father Chaim Herzog, a former Israeli president, and late grandfather Yitzhak Herzog, who served as chief rabbi for Israel's Ashkenazi Jewish community.