TEL AVIV - Tzipi Livni was narrowly elected leader of Israel's ruling party and vowed on Thursday to start work immediately on forming a new coalition that will let her succeed the scandal-hit Ehud Olmert as prime minister.

After a tense night of counting following exit polls that showed the foreign minister cruising to a big win, officials said the final margin over Shaul Mofaz, a former general who is now transport minister, was just over one percentage point.

The final result was a relief to Livni, a 50-year-old lawyer, who had declared victory to supporters hours earlier.

"The good guys won," the one-time Mossad intelligence agent had told her backers within the centrist Kadima party.

Party spokesman Shmuel Dahan put the final result at 43.1 percent for Livni to 42.0 percent for Mofaz -- a huge swing from the 10- to 12-point margins shown in exit polls. Two other candidates trailed well behind.

"On the level of government in Israel, we have to deal with difficult threats," Livni told reporters outside her Tel Aviv home at dawn after an anxious night of waiting for the count.

She made no direct mention of the peace negotiations she has been heading with the Palestinians for the past year.

"The national mission ... is to create stability quickly," she said, adding: "There is economic instability."

Facing what are likely to be complicated talks with potential political partners, Livni said: "Tomorrow, I will begin meeting with representatives of the factions in order to form quickly a coalition that can deal with all of these challenges that lie ahead."

RIFTS

Livni also pledged to heal rifts in the party left by the primary campaign, which ended with the Mofaz camp trying to challenge the count. The Iranian-born former defence chief, popular among fellow Jews of Middle Eastern as opposed to European origin, had yet to make any statement on the result.

Palestinian peace negotiators -- and possibly the sponsors of the peace process in Washington -- were among those applauding as early counts from local offices seemed to confirm a win for Livni.

But the daughter of storied Zionist guerrilla fighters of the 1940s will require combative spirit and political flair to consolidate her goal of becoming Israel's first woman leader since the redoubtable Golda Meir in the 1970s.

Olmert, who telephoned Livni with congratulations, has said he will resign as soon as Kadima has a new leader. But the outgoing premier, who could be indicted for corruption, has also vowed to exercise his right to stay on in a caretaker capacity until Livni forges her own, new coalition government.

That process, involving deals with ambitious Labour party leader Ehud Barak on the left and influential Jewish religious parties on the right, could take weeks or months. Many believe there may yet be an early parliamentary election, which polls show Benjamin Netanyahu's right-wing Likud would win.