The departure of the United Torah Judaism (UTJ) party leaves Prime Minister Benjamin Netanyahu's government with the slenderest of majorities -- 61 of the 120 seats in parliament.
The conscription of ultra-Orthodox Jews is a highly contentious issue for Israeli society and Netanyahu's government.
Under an arrangement dating back to the founding of the state of Israel in 1948, the ultra-Orthodox have been effectively exempted from military service as long as they dedicate themselves full-time to religious studies.
Ultra-Orthodox parties have campaigned for decades for the exemptions to continue, but their demand has become increasingly unpopular among other sections of Israeli society after more than 21 months of war with Hamas in Gaza.
Late on Monday, the UTJ party said it was leaving the coalition over the government's failure to secure the exemptions. Its defection takes 48 hours to come into effect.
The announcement that three more Israeli soldiers had been killed in Gaza on Monday, taking the army's overall losses there to 458, fuelled criticism of the UTJ's position.
"Even as this news was already on the desks of the prime minister and coalition leaders, they continued with full force to promote the draft-dodging law, without thinking about the fighters in the field who need more partners to share the burden with them," opposition lawmaker Avigdor Lieberman posted on X.
After the first of two UTJ factions announced it would quit the government, former prime minister Naftali Bennett wrote: "These politicians are trying to prevent young Orthodox Jews from joining their heroic peers who are defending the people of Israel with their bodies."
Netanyahu, visiting a military base on Tuesday where ultra-Orthodox troops are stationed, called to "mobilise all forces of the Jewish society in order to truly preserve our state and protect our people".
Discussions aimed at amending the conscription law have intensified in Israel in recent months, putting the government under increasing pressure.
Formed in December 2022, the governing coalition hinges on an alliance between Netanyahu's right-wing Likud, far-right parties and those representing the ultra-Orthodox.
Ultra-Orthodox party Shas said it would meet Wednesday for "a crucial discussion on the continuation of Shas's mandate in government" following "serious and unacceptable attacks on the status of Torah scholars" with regard to military service.
If Shas too left the coalition, Netanyahu's government would be left without a majority.
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