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Hard-liner Ariel Sharon trounced him in a 2001 election. Mr. Barak left behind a legacy of failed peacemaking with the Palestinians and Syria, despite unprecedented offers of sweeping territorial concessions, and a contentious decision to end Israel’s 18-year military occupation of south Lebanon overnight, which created a vacuum quickly filled by the anti-Israel Hezbollah guerrilla group.

For six years, the onetime Labor leader kept himself busy with lucrative speaking engagements and business consulting, reportedly amassing millions and cementing his image as a politician out of touch with his constituents.

But Mr. Barak returned to politics in 2007, handily recapturing the Labor leadership and replacing civilian Defense Minister Amir Peretz, who led a much-criticized war in Lebanon the previous summer.

But while Israelis liked Mr. Barak as defense minister, they didn’t want him as their prime minister, and his party, which led Israel to independence and governed the nation for its first three decades, lost its public appeal. In the 2009 election that brought Mr. Netanyahu to power, Labor won an all-time low of 13 of parliament’s 120 seats.

Mr. Barak‘s dovish base turned on him after he led Labor into Mr. Netanyahu’s conservative government, accusing Mr. Barak of betraying the party’s ideals by joining forces with a man who at the time did not even recognize the principle of a Palestinian state.

In January 2011, he bolted Labor to form a new party, Independence, which has largely failed to resonate with the public.

Israeli hard-liners disliked him, too, accusing him of undermining the West Bank settlement movement by holding up building approvals, clearing squatters from West Bank homes and encouraging Mr. Netanyahu to support a temporary settlement construction slowdown.

But if Mr. Barak was unpopular with the public, he retained his clout with Mr. Netanyahu, whom he commanded in an elite special operations unit. As the prime minister’s point man with the United States, Mr. Barak was welcomed in Washington as a moderating influence on Mr. Netanyahu’s hard-line policies toward the Arab world and Iran’s nuclear program.

That alliance has seen some rocky times recently with reports the prime minister objected to Mr. Barak‘s newly moderate tone that Israel should defer to the U.S. in deciding whether to attack Iranian nuclear facilities.

But the two seemed to have patched up things, appearing to work harmoniously on the recent Gaza campaign.

In a statement Monday, Mr. Netanyahu said he “respected” Mr. Barak’s decision.