Tense talks aimed at forming a new Italian government inched forward on Wednesday as two major political parties, struggling to bury years of hostility and avoid snap elections, agreed to re-install Giuseppe Conte as prime minister.

The anti-establishment Five-Star Movement and the opposition center-left Democratic Party (PD) entered formal coalition talks after a ruling alliance between Five-Star and the right-wing League party collapsed this month after infighting.

The talks, which remain tense and could still break down, had been at risk of collapse over who should be named prime minister, but the PD confirmed that it had dropped its opposition to ­Conte, removing one big barrier to a deal.

The PD's leader also secured the backing of the party's executive on Wednesday to forge an alliance with Five-Star, despite a history of bitter relations between the two political rivals.

"We decided to agree to Conte as prime minister because that was what Five-Star ­wanted," PD boss Nicola Zingaretti said.

Both sides have yet to agree on other top government posts or reveal a common policy agenda, with only hours remaining before an effective Wednesday evening deadline for a deal.

President Sergio Mattarella has asked them to report back to him on progress later in the day. If they fail to strike a deal, he is expected to name a caretaker government and call elections as early as October.

Conte, a virtually unknown lawyer when he was chosen by the League and Five-Star to lead their new government last year, is not a member of any political party, though he is seen as being close to Five-Star.