Although he won the election for the premiership by a 12 point margin, his party won only a quarter of the seats in the Israeli parliament.
President Clinton, who had sharp differences with Mr Netanyahu over the stalled peace process, said: "I think the road map is out there." Mr Barak is expected to visit the White House soon to discuss reviving the negotiations.
The Independent has learnt that close aides to Tony Blair and President Clinton had key roles in engineering Mr Barak's winning strategy. Philip Gould, who advises the Prime Minister on public opinion, and Stan Greenberg, who carries out a similar role for President Clinton, have held monthly strategy meetings with Mr Barak for the past two years.
In Jerusalem Mr Barak visited the grave of Yitzhak Rabin, the Israeli prime minister assassinated by a nationalist student in 1995 because he was withdrawing from parts of the West Bank. "A circle has been closed here at the grave of Yitzhak Rabin," Mr Barak said. "A possibility has been opened to fulfil the legacy of Yitzhak Rabin and I am committed to his path." As chief of staff of the Israeli army Mr Barak was close to Mr Rabin, who groomed him for Labour party leadership.
Palestinians are looking forward to Mr Barak beginning to implement the peace agreement brokered by the US at the Wye Plantation in Maryland last October. Mr Netanyahu had not carried out the agreement, claiming Palestinian non-compliance with its terms.
Under the Wye agreement, which has already been passed by the Knesset, Israel would make a limited withdrawal from the West Bank, release prisoners and open a free passage from the Palestinian enclave of Gaza.
In Jerusalem Mr Barak is taking the first steps towards forming an administration out of 15 different Israeli parties. His task is complicated by the row between the secular and ultra-orthodox movements, both of which did well in the election.
Arieh Deri, the leader of Shas, the ultra-orthodox Sephardic party, resigned last night in order to improve its chances of entering the government. Mr Barak had said he could not let Shas enter his administration so long as Mr Deri, who was sentenced last month to four years in prison for accepting bribes, stood at its head.
Mr Barak will rely on his own Labour party, which fought the election under the name One Israel; the Centre Party, made up of enemies of Mr Netanyahu; the left-wing Meretz party; and Russian immigrants to form the core of his administration. He is also sure of the support of the Israeli-Arab parties.
But he would also like the support of Shas, which is open to territorial compromise with the Palestinians over the West Bank and the Syrians over the Golan Heights. Both the previous Israeli governments suffered from being based on narrow coalitions.
Overnight there was a barrage of 60 rockets into northern Israel. Mr Barak has promised to pull out Israeli troops from the zone they occupy in southern Lebanon within a year of taking office. Given the dominant position of Syria in Lebanon he can only withdraw if he is willing to give up the Golan Heights, captured by Israel in 1967.Reuse content