Education Minister Naftali Bennett and Justice Minister Ayelet Shaked said they were leaving the Jewish Home party and would instead lead a new list of candidates.
The Jewish Home is a hard-line nationalist party that is especially popular with religious voters and West Bank settlers. Bennett and Shaked hope that their new movement, called "The New Right," will have a broader appeal to both religious and secular voters.
Bennett has been the leader of the Jewish Home since 2012, and Shaked is one of the country's most popular politicians.
Jewish Home has served as a junior partner to the Likud Party in the past two Israeli coalition governments. But Bennett and Shaked, who are both former aides to Netanyahu, have often been at odds with their former boss.
Bennett, for instance, has called for a much tougher response to Palestinian border protests and rocket fire from the Gaza Strip. He also is an outspoken opponent of Palestinian independence.
At his news conference, Bennett said that Netanyahu takes his religious partners for granted and believes he has them in his "pocket."
In early polls, Likud is far ahead of all challengers and appears poised to lead the next government. If Bennett can siphon away Likud votes, he could be an influential member of the next coalition and be in a stronger position to shape government policies.