Prime Minister Benjamin Netanyahu on Sunday promised change as he tried to ease growing anger over the cost of living after an unprecedented number of Israelis took part in nationwide protests.
Speaking before a weekly cabinet meeting, Netanyahu acknowledged the frustration of the more than 250,000 people who took to the streets on Saturday night to demand cheaper housing, education and health care.
"We can't ignore the magnitude of the social protests," he said.
"We know that we need to make changes and we will do so, showing ourselves to be responsible and responsive to the demands," he added in remarks broadcast on public radio.
"We want to establish a real dialogue and hear from everyone who can propose solutions, even if we cannot meet all the demands," he said.
Foreign Minister Avigdor Lieberman said that while people's grievances were genuine they could not all be addressed.
He warned against trying to meet protesters' demands by cutting the defence budget, citing threats such as Iran, which Israel and much of the international community say is seeking to develop nuclear arms.
"It's not theoretical and it can't be ignored," he told reporters. "It is wrong to cut the defence budget."
Netanyahu said he had appointed prominent economist Manuel Trachtenberg, the head of Israel's National Council for Higher Education, to form a team for dialogue with the protest groups.
"I have mixed feelings about being tasked with this mission, because changes are imperative, but the responsibilities and the risks are enormous," Trachtenberg told Israeli radio.
The committee, which is to seek ways to make across-the-board cuts to the cost of living, will also consult with employers and unions.
"The recommendations of this team will without doubt be presented in September to the committee for economic and social affairs, and then the whole government," Environment Minister Gilad Erdan told Israeli radio.
He said he expected "radical changes."
Itzik Shmuli, a protest leader, received news of the commission with caution, but welcomed the choice of Trachtenberg to lead it, calling him "trustworthy."
But it was unclear whether the crowds who took to the streets on Saturday would be placated by the appointment of another committee -- the second Netanyahu has proposed to establish to examine protesters' demands.
The turnout, believed to be the largest for protests over any social issue in Israel's history, showed the staying power and broad appeal of a movement that began in mid-July over the cost of housing and has quickly mushroomed.
In Tel Aviv alone, commercial capital of a country of 7.7 million, an estimated 200,000 people took to the streets, many chanting "the people want social justice."
Police said another 30,000 protested in Jerusalem, with 20,000 taking part in demonstrations in towns ranging from Kiryat Shmona in the north to the southern cities of the Negev desert.
Netanyahu has already said he takes the protests seriously and will work to implement reforms, but he has warned that the sweeping measures favoured by many protesters could plunge Israel into financial crisis.
He has at times appeared to have been caught unawares by the size and appeal of the demonstrations, which were initially dismissed by his right-wing Likud party colleagues.
He has infuriated protesters by supporting legislation easing regulations for building contractors, which parliament passed before its summer recess.
Netanyahu says the legislation will address protesters' demands by flooding the market with housing and bringing down prices, but activists say it will merely encourage the construction of luxury apartments.
They also say the government fails to understand the breadth of the reforms they seek, which include lower taxes, an expansion of free education, lower medical costs and a break-up of monopolies.
Israel's media largely supports the protesters, with a commentator in Haaretz newspaper on Sunday describing the movement as a revolution.
"With emotion but great order, the masses marched through the city shouting 'revolution'," wrote Yair Ettinger. "Is this rebellion here to stay? Will it die out? For the time being it's only picking up strength."
In the top-selling Yediot Aharonot newspaper, Sima Kadmon called the protests "the largest demonstration of no confidence in the history of Israel."
Israel Hayom, a paper considered close to Netanyahu, offered a rare voice of caution, warning that any reforms should be made "with utmost responsibility."