The coalition was struggling to renew years long legislation, which regulates the extension of Israeli law to the West Bank.
The bill which must be renewed by the Knesset every five years and is set to expire by the end of June, was pulled from consideration after it did not have majority support.
This bill was amongst several other legislations that came up during Monday's Knesset session and were postponed because the coalition lacked a parliamentary majority.
The vote on the West Bank regulations, which was postponed to next week, is a new test for the coalitio," Minister of Justice Gideon Saar said on Tuesday. "It will show if the coalition wants to continue to exist or not."
The Islamist Ra'am party, a member of the coalition and the predominately Arab Joint List opposition faction, both oppose an extension of the bill which in their view implies a de facto Israeli sovereignty over the territory Palestinians claim for their own state.
The opposition, under the leadership of Benjamin Netanyahu announced on Wednesday that they would not support the bill either claiming it is not their job to bail out the government of Prime Minister Naftali Bennett when he fails to muster his coalition partners' support.
Should the coalition fail to extend the regulations, Israeli law for the most part, will not apply to the West Bank which has not been officially annexed by Israel and remains under military rule.
"Without this law, Israelis would be tried through the military courts, which is something we certainly would not want," he said. "Were it not for this law, security prisoners in the Israeli prison would have to be held in military prisons in Judea and Samaria. The police would not be authorized to investigate crimes committed by residents of Judea and Samaria, even if they took place in Israel.
"This situation may turn the communities in Judea and Samaria into sanctuary cities for Israeli criminals,” he said.
There are things a government can live without, but this bill has regulated the judicial reality in Judea and Samaria since the 1967 Six Day War, and it must be renewed by the end of June," he said.