Ministers also approved the appointment of Labor MK Ephraim Sneh as Deputy Defense Minister.
Science, Sports and Culture Minister Ophir Pines-Paz voted against the move, as ministers of the Pensioners' Party voted in favor despite threats to vote against is they are not given the Welfare portfolio.
'No change in principles'
The Knesset will convene to vote on the deal Monday evening.
"He will be in charge of collecting the strategic intelligence in Israel," Olmert said.
"None of the ministers' prerogatives …will be changed by Lieberman's addition to the government. There is no change in the government's principles either," Olmert said.
The Labor Party voted in favor of remaining in a coalition that includes Israel Our Home, but fears grew over Pines-Paz's future in the party and the government with many saying he would resign.
Following the session Pines-Paz told Labor Party members of his decision to resign from his post.
Labor MK Shelly Yacimovich said she would abstain in the vote on Lieberman's inclusion in the government.