The 18th Knesset was elected on February 10th 2009; it served almost a full 4 year term alongside and with the 32nd Government led by Prime Minister Benjamin Netanyahu.
At its inception the coalition was established by the Likud, Yisrael Beitenu, Shas, Labor, Habayit Hayehudi and United Torah Judaism. On the 17th of January 2011, Ehud Barak and four other Knesset Members split from the Labor Party and formed the Atzmaut Party which joined the coalition. As a result, the government ministers affiliated with the Labor Party resigned their positions. On the 7th of May 2012, following Shaul Mofaz's defeat of Tzippi Livni in the Kadima primaries, the Kadima Party joined the coalition under his leadership. Shortly after joining the Coalition, on July 17th, following a conflict with the Likud regarding the policy of the "Equality of Service," Kadima resigned from the Government.
The Knesset Elections were moved up and set for the date of January 22nd 2013 on the backdrop of the difficulties in passing the 2013 budget.
Even though there was much pressure by the American Government towards reaching an agreement with the Palestinians, no progress was made on the matter between the different sides during the 18th Knesset's tenure. At the beginning of its tenure the Prime Minister imposed a moratorium on building in Jewish areas beyond the “Green Line” for 10 months and agreed in principle to the "Two-State Solution." In September 2011 the Chairman of the Palestinian Authority Mahmoud Abbas initiated a move that would promote a change in the Palestinian Authority's status, and in the end, the Palestinian Authority was granted the status of a non-member observer state in the United Nations on November 29, 2012.
There was also a conflict of policy with the United States regarding Iranian progress on developing a nuclear weapon and the steps needed in order to prevent it. Israel demanded that severe measures such as sanctions should be taken towards hampering Iran's goals. A number of debates were held in the Knesset and other official forums regarding a possible Israeli strike on Iran, something which Israel has not denied as a possibility and has asked for support from the US should this ever become reality.
With regards to the political situation in the Middle East, in February 2011 after an uprising by Egyptian civilians, President Hosni Mubarak resigned as President and passed his duties over to the military. Israel avoided publicly supporting either side during the uprising. In July 2012 Muhammad Morsi was elected to become President of Egypt as the candidate of the Muslim Brotherhood, while towards the end of the Knesset's term the Syrian Government was still cracking down violently on the revolt which ensued.
The 18th Knesset saw a sharp deterioration of the relationship between Israel and Turkey. As a result of Turkey's Prime Minister Erdogan's speech against Israel, Deputy Foreign Minister Danny Ayalon summoned the Turkish Ambassador to his office for a rebuking. An additional deterioration occurred during May 2010 when an IDF team took over the Mawi Marmara boat which made its way with hundreds of rioters armed with knives axes and bats and tried to infiltrate Gaza. During the seizure of the vessel, 9 Turkish citizens were killed and 44 injured. MK Hanin Zouabi was also on board. Zouabi's actions aroused condemnation from across the political board. In July of 2010 the Knesset approved the revoking of MK Zouabi's privileges in accordance with the Member of Knesset Immunity Law until the end of the 18th Knesset's term.
In the beginning of May 2010 Israel was accepted to the OECD – Organization for Economic Co-Operation and Development. During the 18th Knesset's term the global financial crisis continued, which affected European countries, the United States and other countries across the globe. Israel was also affected, and as a result in the summer of 2011 a series of social protests were ignited based on the continuous hike in the prices of commodities and the lack of affordable housing. In the beginning of August 2011 Prime Minister Netanyahu established the Public Committee for Social and Economic Change led by Professor Manual Trachtenberg. The Knesset approved through legislation most of the Committee's findings, including recommendations regarding housing, taxation, education and competitive markets.
In March of 2011, following the recommendations of the Committee for Fiscal Policy regarding Fuel and Natural Gas Resources led by Professor Eitan Shasinsky, the Knesset approved the legislation of the law which determines the Government's cut (52%-62%) of the income from the development of fuel and natural gas resources. This motion followed the discovery of large natural gas resources off the coast of Israel, which established the need for a revision on the matter.
The Knesset weighed in on issues like market concentration and the need to impose limits on especially influential businessmen also known as "tycoons." In July 2011 the Knesset approved the law that determines that the Anti-trust Supervisor will be permitted in certain cases to declare a certain closed group operating within the market as a "group of concentrations."
The 18th Knesset held sessions regarding the devastating Carmel Forest fire; these sessions dealt with the performance of different government ministries which had a part in handling the blaze and in treating the victims. The State Comptroller filed a special report on the disaster and its conclusions were debated in the various Knesset Committees and in the Plenum.
The issue of illegal workers and infiltrators who entered Israel predominantly through Egypt continued to be on the forefront during the 18th Knesset. In order to hamper the continued infiltration of the border with Egypt, Israel erected a fence along the border and built a detention center nearby in Ketziot. The Knesset, through legislation, created more severe penalties for offenders.
Towards the end of the 18th Knesset's term, the "Tal Law" which comprised a temporary order meant to allow Yeshiva students to be exempt from military service, expired. Even though two committees were established with the purpose of promoting legislation regarding service in the military, one as a subcommittee of the Foreign Affairs and Defense Committee, and the other after Kadima joined the Coalition and was named the Committee for the Promotion of the Equality of the Burden of Service, both committees failed to legislate a new solution for the matter.
In the 18th Knesset the issue of "lobbyists" and their influence on Knesset Members arose. In January 2013, the Israeli Institute for Democracy filed a report to the Speaker of the House titled "The Lobbyists Report." The report presented lobbyist activity to be legitimate and necessary but proposed that certain prohibitions be defined as criminal.
On the 18th of October 2011, Gilad Shalit was released from captivity after almost 5 years, in exchange for 1,027 Palestinian terrorists.
In November 2012, following a large amount of rocket attacks originating from the Gaza Strip aimed at cities and towns in Israel, the IDF set out on a military operation known as "Pillar of Defense" in an attempt to eradicate the threat. In a surgical strike the commander of the Hamas militant wing, Ahmad Ja'abari was killed. Before and during the Operation missiles were fired on areas in the South and as far as Tel Aviv and Jerusalem. The Iron Dome Missile Defense System operated with great success intercepting close to 85% of its assigned targets. The operation lasted 9 days and ended in a ceasefire brokered by the United States of America and Egypt.