Mr Netanyahu's denial of personal responsibility for appointing Roni Bar-On, an obscure Jerusalem lawyer, to the post, exacerbated divisions in the cabinet. Mr Netanyahu's lawyer said he should not be blamed, because he was misled by Tzahi Hanegbi, the Justice Minister, about the acceptability of Mr Bar-On. Israeli television said, however, that when police questioned Mr Netanyahu about the affair they found his answers "evasive".
Whatever the outcome of the scandal, it has weakened Mr Netanyahu politically when he hoped to benefit from signing the Hebron agreement. Nahum Barnea, an Israeli columnist, wrote: "It is not Jerusalem which is really bothering Netanyahu right now, but rather the police investigation."
Three ministers have threatened to resign over the affair. Avigdor Kahalani, Minister of Internal Security, said that if the accusations turn out to be true "the government has no right to continue".
The police investigation started on 22 January, when Ayala Hasson, a reporter for Israeli television, alleged that Aryeh Deri, leader of the Shas party, which is in the ruling coalition, and who is on trial for corruption, had orchestrated the candidacy of Mr Bar-On, who held office for one day. The specific accusation was that Mr Deri had threatened to block the Hebron agreement with the Palestinians unless Mr Bar-On got the job and Mr Deri won a plea-bargain.
During the month-long police investigation it has become clear Mr Deri and others close to the government who were on trial or facing indictment were all involved in the appointment of Mr Bar-On. Worse, from Mr Deri's point of view, his own lawyer, Dan Avi-Yitzhak, resigned last week and denounced his former client.
Mr Netanyahu has fought his way out of tight corners before. But he has yet to come up with a convincing explanation of his determination to replace the previous attorney-general with somebody more malleable. During the first weeks of the investigation it appeared possible the Prime Minister would be unscathed by the police investigation. In questioning him about the affair, however, police say he repeatedly said: "I don't know" and "I don't recall." They then cautioned him that he might face criminal charges.
Following this disclosure, Nissim Zvilli, secretary-general of the Labour party, called for a fresh election, although Labour itself is divided. Mr Netanyahu has hired his own lawyer, Yaacov Weinroth, a top criminal attorney, who repeatedly implied over the weekend, in defence of his client, that the Prime Minister was misled by Mr Hanegbi. This may be good legal tactics if Mr Netanyahu's objective is to stay out of court, but he could pay a heavy political price for throwing one of his cabinet to the wolves.
Visiting King Hussein in Jordan over the weekend, Mr Netanyahu accused his opponents of counting him out too early. He said: "I intend to continue to lead the state of Israel. I heard the (opposition) is getting ready for new elections. I have good advice for you: `Wait. You have a good four years left in the opposition'."
The Prime Minister's office believes Mr Netanyahu is the victim of a campaign by the media. It particularly objects to analogies between Mr Netanyahu and President Richard Nixon during Watergate.