Israel's Prime Minister Benjamin Netanyahu sacked his finance and justice ministers on Tuesday, signalling the break-up of his bickering coalition and opening the way for early national elections in Israel.

Netanyahu's government, which only took office last year, has been unravelling over an array of issues, including the 2015 budget and a Jewish nation-state bill that critics say discriminates against Arab citizens.

Two television polls on Tuesday said Netanyahu's rightist Likud party would emerge once again as the largest group in parliament if elections were held today, almost certainly ensuring him a fourth term as prime minister.

The next national ballot is not scheduled until 2017, but Netanyahu announced that he wanted to dissolve parliament "as soon as possible" and hold an early election.

He also ordered the dismissals of Finance Minister Yair Lapid and Justice Minister Tzipi Livni, the heads of two separate centrist parties who have been chaffing against the right-wingers that predominate in the cabinet.

Netanyahu said Lapid and Livni had quietly tried to form an alternative coalition. "In one word, that is called a putsch. And that makes it impossible to run a government," he said in a televised news conference.

Livni denied his accusations and said the prime minister had been working behind the scenes to replace them.

With next year's budget not agreed and growth slowing in the wake of the July-August Gaza war, Lapid accused Netanyahu of putting his political interests before those of Israel.

"The firing of ministers is an act of cowardice and loss of control. We are sad to see that the prime minister has chosen to act without consideration for the national interest and to drag Israel to unnecessary elections," his Yesh Atid party said.

A motion to dissolve parliament is expected to be heard on Wednesday and could come into effect next week once a date for an election had been decided. Commentators speculated that the vote might come in March.

Israeli markets fell on the election news, with the shekel sliding 1.3 percent to a two-year low against the dollar.

The government will remain in power until a new one is sworn in. Without the backing of Lapid and Livni's centrists parties, it would be a minority caretaker administration mainly dealing with day-to-day business.

Relations between Netanyahu and Lapid - a former television chat show host whose newly formed party came a surprise second in 2013 - disintegrated over the finance minister's drive to exempt first-time home buyers from value added tax.

As with the 2013 election, campaigning for any 2015 vote is likely to be dominated by domestic issues, such as the high cost of living, rather than international affairs or the possibility of reviving defunct peace talks with the Palestinians.

Livni fell out with Netanyahu over the nation-state legislation, which won cabinet approval a week ago, but she has looked uncomfortable in the government ever since peace negotiations with the Palestinians collapsed in April.

A new mandate could give Netanyahu more leeway domestically to pursue his expansionist settlement policies on occupied land Palestinians seek for a state. It will also allow the prime minister to push ahead with the Jewish nation-state bill that he says is essential to protecting Israel's Jewish identity.