He and top-ranking National Party MPs met in the city yesterday to put together a new governing arrangement which will include United Future, Act, probably the Maori Party and some form of understanding with the enlarged Green Party.
The first Cabinet meeting will be held today and new ministers could be appointed this week.
National was on the margin of being able to govern alone after Saturday's result, securing the highest percentage of the vote since the waterfront strike election in 1951.
Mr Key indicated he had already approached United Future leader Peter Dunne and Act Epsom MP (and former National cabinet minister) John Banks and they had pledged support for his new government.
National holds 60 seats.
There was an unlikely tie in Christchurch Central between incumbent Labour MP Brendan Burns and National list MP Nicky Wagner and, given the swing against Mr Burns in the electorate, special votes should go the way of Ms Wagner and give National another seat.
Given Mr Key's good understanding of operating in an MMP environment, he will make overtures to the Maori Party - with asset sales likely to be the bargaining point.
National is likely to push ahead with the partial sell-down of electricity generators Mighty River Power, Genesis, and Meridian and coal producer Solid Energy, with iwi at the front of the queue to get shares. That agreement will provide Mr Key with another three votes, meaning possibly 66 votes on confidence and supply.
Mr Key mentioned many times through the campaign that he regarded iwi as natural investors in the 49% of the state-owned assets up for sale. Genesis, of which former National prime minister Dame Jenny Shipley is the chairwoman, is most likely to be the first sold. Genesis has a strong presence in Waikato, home to Tainui.
Green Party co-leaders Russel Norman and Metiria Turei are also likely to get a call. .
The Greens have a tough decision to make. While they will not want to go into coalition with National, their previous memorandum of understanding allowed Green policies to be pushed through at a greater success rate than during the previous nine years of a Labour administration.
The Greens oppose asset sales but could abstain on some votes to get some of their other polices through.
Mrs Turei has previously told the Otago Daily Times that the home insulation programme, which created hundreds of jobs for tradespeople, would be continued by National.
She hoped the training allowance would be extended to help solo parents get new skills and better paying jobs. The Greens also could negotiate on changes to KiwiSaver, which National plans to change once the books are back in credit.
New Zealand First leader Winston Peters will not play a part in the formation of the government, despite returning to Parliament with seven MPs.
He has promised to stay in opposition but Mr Key ruled out dealing with Mr Peters well before election night. The only other parties Mr Key will not deal with are Labour (with 34 seats) and Mana (with one).
Having both the Maori Party and the Greens on side, even without a formal coalition, will allow Mr Key to push through asset sales, but with a twist.
Dealing with the expectations of Mr Banks will be a problem for Mr Key. Mr Banks will likely want a cabinet post for his support but doing that would see Act disappear, leaving National without a coalition ally in 2014.
The Prime Minister indicated yesterday he would be standing again at the next election and will not want to face defeat for the want of an ally after such an outstanding National Party victory.
