PM Benjamin Netanyahu is likely to secure a record fifth term after almost complete results from Israel's election suggest a new right-wing coalition.
His Likud party is expected to finish with a similar number of seats as ex-military chief Benny Gantz's centrist Blue and White alliance. But Likud and right-wing allies are set to be the largest bloc with 65 seats in the 120-seat Knesset, local media said.
The 69-year-old premier is facing corruption allegations. However, the election result means he could become Israel's longest-serving prime minister later this year, overtaking Israel's founding father David Ben-Gurion.
Exit polls had predicted a tight race with no clear winner, prompting both Mr Netanyahu and Blue and White leader Benny Gantz to claim victory on Tuesday night. "It will be a right-wing government, but I will be prime minister for all," Mr Netanyahu told cheering supporters.
"I'm very touched that the people of Israel gave me their vote of confidence for the fifth time, and an even bigger vote of confidence than previous elections. "I intend to be the prime minister of all citizens of Israel. Right, left, Jews, non-Jews. All of Israel's citizens." No party has ever won a majority in Israel's 120-seat parliament and it has always had coalition governments.
'Netanyahu's most serious challenge yet'
By BBC Middle East correspondent Tom Bateman, Tel Aviv
There were roars of celebration at the election night party for Benny Gantz as the first exit poll was released. His supporters believed Israel was on the brink of a new centre-ground government.
But as the votes were counted overnight, Benjamin Netanyahu's success became clearer. The incumbent PM's Likud party appears most likely to be able to form another coalition government with the help of right-wing nationalist and religious parties.
He said history had given the people of Israel another chance as his supporters, using his nickname, chanted: "Bibi, the King of Israel."
With left-wing and Arab-Israeli parties suffering heavy losses, his win appears decisive, despite the most serious challenge yet to his decade in office.
What's the background?
Mr Netanyahu, 69, put forward tough messages on security ahead of the vote and it soon became one of the election's key issues.
He also made a significant announcement in the final days of the campaign, suggesting a new government would annex Jewish settlements in the occupied West Bank.
The settlements are considered illegal under international law, although Israel disputes this.
Mr Netanyahu denied the allegations of corruption against him, saying he was a victim of a political "witch hunt" designed to influence the election.
In a separate controversy on Tuesday, Israeli Arab politicians condemned his Likud party for sending 1,200 observers equipped with hidden body cameras to polling stations in Arab communities.
The Arab alliance, Hadash-Taal, said it was an "illegal" action that sought to intimidate Arabs. Likud said it wanted to ensure only "valid votes" were cast.
Mr Netanyahu's main challenger, Mr Gantz, is a retired lieutenant-general who formed the Blue and White in February, promising to unite a country that had "lost its way".
The 59-year-old former chief of staff of the Israeli military rivalled Mr Netanyahu's tough stance on security and promised cleaner politics.
Mr Gantz's campaign platform referred to "separation" from the Palestinians but did not specifically mention them having an independent state. It also called for continued control over the Jordan Valley and retaining West Bank settlement blocs.