Israeli Prime Minister Benjamin Netanyahu on Tuesday put Iran at the top of on his re-election campaign, pledging that halting Tehran's nuclear programme would be his first priority as premier.

"Who do (Israeli voters) think is the most suitable candidate to deal with the Iranian threat? With the missile threat? With the threat of terror?" he asked supporters in Jerusalem in a speech at the official launch of his campaign for January 22 polls.

"We still have a lot ahead of us," he said. "First and foremost we must stop Iran's nuclear programme, and the time for that is slipping away. That is my first mission as prime minister."

Israel and Western powers accuse Iran of seeking to acquire a weapons capability under the guise of its nuclear energy programme. Iran denies the charge, saying its work is for peaceful purposes only.

At a speech before the UN's General Assembly in September, Netanyahu warned that if Iran continued work at the current pace, it could have the necessary material for a first bomb by the summer of 2013.

In his speech on Tuesday night, Netanyahu expanded at length for his domestic audience on what he termed his government's economic achievements and laid out his future goals. He only briefly addressed the peace process.

"Our hand will continue to be extended to our neighbours for true and mutual peace, while continuing to insist on the state of Israel's vital interests -- I'm telling you -- in the face of all the pressure," he said.

On Monday, Israel approved the latest in a series of plans for approximately 5,000 Jewish homes in east Jerusalem and the West Bank.

Palestinians want east Jerusalem as capital of their promised state, and they -- along with the international community -- consider settlement construction in east Jerusalem and the West Bank a violation of international law.

"With God's help, we will continue to live and build in Jerusalem, which will always stay united under Israeli sovereignty," Netanyahu said.

"In the last years we did a lot to strengthen the settlements, and we will continue to act to strengthen" them in the next term, said Netanyahu.

Polls predict that Netanyahu's Likud party, which is running on a joint list with the ultranationalist Yisrael Beitenu faction of former foreign minister Avigdor Lieberman, will be by far the largest party in the next parliament.

Lieberman, who earlier this month resigned from Netanyahu's cabinet after attorney general Yehuda Weinstein said he would charge him with breach of trust, used the opportunity to blame Palestinian president Mahmud Abbas for the freeze in peace talks.

"I hear people reproaching us, that we need to speak with Abu Mazen and the Palestinians," he said using Abbas's nom de guerre.

"The enlightened Left ... offered to return to the 1967 borders and divide Jerusalem and Abu Mazen said -- niet," Moldovan-born Lieberman said, using the Russian word for "no".

After the event, Lieberman was taken for further questioning by the police following Weinstein's decision to re-open the investigation and possibly toughen the charges against the former minister.

Lieberman, despite resigning from cabinet, is still running for cabinet as Netanyahu's number two.

He has said he hopes for a quick trial that would be over by the elections. But the justice ministry announced on Sunday it might conduct further probes.