Israeli Prime Minister Benjamin Netanyahu's main rival conceded defeat in the country's elections, paving the way for the long-time leader to forge a coalition that has the potential to be the most religious and far-right government in the country's history.

Leaders of the Blue and White party, headed by former military chief Benny Gantz, made the concession announcement as it appeared there was no way it could secure the 61-seat majority it needs in Israel's 120-seat Knesset to form a government.

"We didn't win this time," said Yair Lapid, a Blue and White leader. "I respect the voters' decision."

He vowed that the party would come back fighting in the next election. Speaking after him, Gantz said he would serve Israelis whether or not that's from within government.


"It's just my first day in the next 10 years that I plan to serve the Israeli public," he said. "The war is not over."

Netanyahu's Likud Party and Blue and White are both on track to win 35 seats in Israel's Knesset, or Parliament, with about 97 per cent of the votes tallied.

Netanyahu appears to have a clear path to a majority coalition, with his natural partners on the right of the political spectrum projected to win 65 seats.

US President Donald Trump, who spoke to the Prime Minister by phone, said that it might be "a little early" but said it looked like Netanyahu had "won it in a good fashion."

"The fact that Bibi won, I think we'll see some pretty good action in terms of peace," said Trump, using Netanyahu's nickname. "Everybody said you can't have peace in the Middle East with Israel and the Palestinians. I think we have a better chance with Bibi having won."

But others disagreed, pointing to the likely make-up of his coalition and his campaign promise to annex parts of the Israeli-occupied West Bank.

Netanyahu had presented the election as a referendum on his leadership. His victory speech, delivered with a beaming smile, showed that he believed he had won a new mandate, despite the prospect that he could soon be indicted by the attorney-general in three corruption cases.

Netanyahu went all out to hold on to power. He forged a deal to ensure right-wing votes were not wasted by pressuring small right-wing parties to run jointly with the extremist Jewish Power party, considered toxic even for many on the right wing of Israeli politics.


To woo right-wing voters to his own Likud Party, he made a last minute pledge to extend Israeli sovereignty to Jewish settlements in the West Bank, which are considered illegal by much of the international community.

"Netanyahu will be very much beholden these small right-wing parties," said Michael Halperin, executive director of the Israel Policy Forum, which supports a two-state solution for Israelis and Palestinians. "Even if he personally doesn't want to advance issues of religion and state like annexing the West Bank, he will be under pressure to do so."

The two main ultra-Orthodox slates appear to have won a total of 16 seats, up from 13 seats in the outgoing Knesset, while an extreme-right-wing alliance that includes the Jewish Power party, followers of the outlawed Rabbi Meir Kahane, won five. Analysts said Netanyahu will be trading ministerial positions for support regardless of whether he's indicted.

The Central Elections Committee, which oversees the count, said the final tally would not be available until tomorrow NZT.

President Reuven Rivlin said he would wait until next week to gather recommendations from party leaders on who they want to lead the next government, leaving ample time for political jockeying.

Halperin said the election results "raise questions about the viability of any Trump peace plan in the near term."

"The strongly right-wing coalition that Netanyahu needs is not a coalition that is likely to accept any kind of compromise," he said.

Those sentiments were echoed by chief Palestinian negotiator Saeb Erekat. "What the early results suggest is that Israelis have voted to preserve the status quo. They have said no to peace and yes to the occupation," he tweeted.

Israel's left wing was devastated after the split in the Zionist Union, which had brought together the Labour Party and former Foreign Minister Tzipi Livni's Hatnuah. While the Zionist Union had held 24 seats, Labour running alone won six, according to partial results. Left-wing Meretz won four.

It is now up to President Reuven Rivlin to nominate the leader of the party he thinks will have the best chance at forming a government, based on recommendations from the heads of each of the parties. Rivlin said he would start his consultations next week and, "in a historic and pioneering decision," would broadcast all the meetings live "in the name of transparency."

In the partial count, Likud was slightly ahead in the total number of votes, with 13,375 ballots more than Blue and White. Gantz, though, yesterday told his supporters not to lose hope.

"Yes, the odds are not in our favour, but two things are missing," he said, pointing to "a possibility of electoral shifts."

"The second is without a doubt the recognition of the hope we delivered to the Israeli people and society," he said.

But analysts suggested he was grasping at straws. "Gantz gave victory speech last night but woke up this morning with hangover," said Reuven Hazan, a politics professor at Jerusalem's Hebrew University.

Netanyahu thanked supporters.

"It's an unbelievable, tremendous victory," Netanyahu said, with his wife, Sara, at his side.

Netanyahu had presented the election as a referendum on his leadership, and his beaming smile showed he believed he had succeeded in winning a new mandate from his people, despite his legal challenges. The attorney-general in February recommended that the Prime Minister be indicted in three corruption cases, including on bribery, corruption and breach-of-trust charges, pending a hearing.

If he were to remain in power, Netanyahu would be in a much stronger position to fight the charges and draw out the legal process, analysts said. If he forms a new government and survives until July, he will make history, becoming the country's longest-serving prime minister, outstripping Israel's founding father David Ben-Gurion.

The party of right-wing Education Minister Naftali Bennett looked like it may not reach the minimum 3.25 per cent of the vote needed to enter the Knesset, though military votes had not been fully counted.

There is a possibility that Netanyahu could reach out to Blue and White - or parts of it - to form a unity government.

But Gantz has publicly ruled out sitting in a government with Netanyahu.

What is certain is that Gantz, a former military chief of staff who first entered politics late last year, has put up a formidable challenge, even if he looks likely to fall at the final hurdle.

When Netanyahu called the election, he thought he would have a "comfortable walk" ahead, said Hazan.

"We saw a new party and a tight horse race," he said, adding that given the legal allegations hanging over his head, Netanyahu might not be celebrating for long. "This is his fifth term, but it might end up being his shortest one," he said.

Meir Rubin, executive director of the right-wing Kohelet Policy Forum called Gantz's performance an "incredible achievement."

"He started his move three months ago, and it looks like he could have won as many seats as the Likud party that's existed for more than 40 years," he said.

Voter turnout stood at 67.9 per cent, dipping from 72.33 per cent in 2015, amid reports of low voter turnout among Israeli Arabs. Making up 20 per cent of the population, Israeli Arab voters had been frustrated by a split in the main Arab factions, while Israel's controversial Nation State law bolstered calls for a boycott. However, one Arab faction that had looked like it might drop out of the Knesset, Balad-Ram, appeared to have scraped in.

Despite the legal challenges he faces and the controversies he has courted, Netanyahu has a die-hard base that will vote for him unquestioningly. Michaela Ben Lulu, a lifetime Likud supporter, called Netanyahu a magician and said she admired his diplomacy, especially his relationship with Trump.

"He loves this nation, and the nation loves him," she said of Netanyahu. "I don't care about the corruption claims or indictment. He doesn't need money. He's straight and trustworthy."