Israeli PM Benjamin Netanyahu looks all but certain to stay in office for a record fifth term after his biggest election challenger, Benny Gantz, admitted defeat on Wednesday.
With almost all votes counted, both men's parties are neck and neck.
But a coalition between Mr Netanyahu's Likud and smaller right-wing and religious parties could form a 65 seat majority in the 120-seat Knesset.
US President Donald Trump has already offered his congratulations.
Mr Netanyahu tweeted that the president had called him from Air Force One - the US presidential aircraft - on Wednesday.
If he forms a new governing coalition, Mr Netanyahu would be on course to become Israel's longest-serving prime minister, overtaking the country's founding father David Ben-Gurion.
However, he could be indicted in three corruption cases in the coming months.
Mr Gantz's deputy in the centrist party has vowed to make the government's life difficult after the close result.
"We didn't win in this round. We will make Likud's life hell in the opposition," Yair Lapid said.
In a late-night speech to supporters on Tuesday, Mr Netanyahu claimed a "colossal victory".
"It will be a right-wing government, but I will be prime minister for all," Mr Netanyahu told cheering supporters at Likud's headquarters.
"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."
The remaining ballots, cast at military bases, will be counted over the coming days, Reuters reports.
President Reuven Rivlin will then chose a leader best placed to assemble a majority.
No party has ever won a sole majority in Israel's parliament and it has always had coalition governments.
Exit polls had earlier predicted a tight race with no clear winner, and after initial results Mr Gantz also claimed victory.