Netanyahu announced on Monday that he would return the mandate - the opportunity to put together a government - to President Reuven Rivlin ahead of Wednesday's deadline, blaming his failure on Gantz, Blue and White deputy head Yair Lapid, and Yisrael Beytenu party leader Avigdor Liberman, The Times of Israel reported.
Rivlin is now expected, probably on Tuesday, to charge Gantz with the task of trying to muster a coalition that can win a Knesset (Parliament) majority.
"The feeling is terrific," a cheerful Gantz told reporters on Tuesday morning.
"We finished a morning workout and will now go for the day's work. Everything is okay. We are always optimistic; it is a way of life."
In a statement on Monday, the Blue and White party said "the time for spin is over" and that it was "determined to form the liberal unity government, headed by Gantz, that the nation elected a month ago".
It was the second consecutive time Netanyahu has been unable to build a majority.
Following elections in April, Netanyahu was one seat short of a majority and pushed through a vote to dissolve the Knesset and call a snap vote rather than have another lawmaker be tasked with forming a government.
Gantz has 28 days to try and do what Netanyahu could not, said The Times of Israel.
If he fails, any Knesset member will have 21 days to obtain the support of a parliament majority to form a government.
If no one succeeds, elections will be initiated automatically - a third round inside a year after April's and September's inconclusive votes.
( With inputs from IANS )