Exit polls suggest the prime minister's right-wing bloc may fall just short of a majority in parliament.
Mr Netanyahu has promised to annex Jewish settlements in the occupied West Bank
Prime Minister Benjamin Netanyahu has claimed victory in Israel's general election, after exit polls put him ahead of his main rival Benny Gantz.
Three projections gave Mr Netanyahu's right-wing Likud party 36 or 37 seats, and Mr Gantz's centrist Blue and White alliance between 32 and 34.
However, the polls suggested Likud and its right-wing allies might fall just short of a majority in parliament.
Monday's election was Israel's third in less than a year.
Neither of the two main party leaders was able to command a majority in the 120-seat parliament following the last two rounds.
Mr Netanyahu, 70, is Israel's longest-serving leader. He is seeking a record fifth term, having been in office from 1996 to 1999 and again from 2009.
The election took place two weeks before the prime minister is due in court to face corruption charges, which he denies.
What do the exit polls suggest?
Pre-election opinion polls suggested Likud and Blue and White were more or less tied, with neither Mr Netanyahu nor Mr Gantz sure of a clear path to victory.
But the exit polls published by Israel's three main broadcasters indicated Likud was on course to win between three to five more seats than Blue and White.
The Joint List alliance of Arab parties was projected to get 14 or 15 seats; the ultra-Orthodox parties Shas and United Torah Judaism 16 or 17 between them; the nationalist Yisrael Beitenu party six or seven; the right-wing Yamina alliance six or seven; and the centre-left Labour-Gesher-Meretz list six or seven.
If the exit polls are accurate, it would mean that Likud and its right-wing allies end up with 59 or 60 seats - one or two seats shy of a majority in parliament.
The initial results are expected on Tuesday, and exit polls have displayed inaccuracies in the past.
The exit polls put Mr Netanyahu within touching distance of forming a coalition government.
They aren't the real results; we'll have to wait many more hours for those.
And have one caveat in mind: Mr Netanyahu couldn't form a government with 60 seats for the right-wing bloc last April, leading to a year of political paralysis.
But he's already declaring victory: an important psychological part of fending off continuing calls to step aside over his corruption trial due to start later this month.
Meanwhile, the exit polls spelled bitter disappointment Mr Gantz.
At his party's election night HQ in Tel Aviv the spotlights swirled over a nearly empty hall floor. I could find only two party activists to talk to, who suggested the game wasn't over yet. Wait for the full results, they said.
How have the party leaders responded?
After the exit polls were published, Mr Netanyahu posted on Twitter a photo of him celebrating "a great victory for Israel".
Later, he wrote: "We won thanks to our belief in our path and thanks to the people of Israel."
Likud said in a statement that Mr Netanyahu had spoken with the heads of other right-wing parties and "agreed to form a strong national government in Israel soon".
Mr Gantz did not immediately admit defeat, but accepted that the exit polls did not appear promising.
"I realize and share your feelings of disappointment and pain, for this isn't the result that we wanted to happen," he said.
Israel, he added, "needs unity, it needs conciliation, it yearns for a leadership that unites, and that is something that we will continue to offer the Israeli public".
Yisrael Beiteinu leader Avigdor Lieberman, who was in the position of kingmaker after the last two elections, said it would keep its campaign promise not to join a coalition with religious parties.
"We are party with an orderly worldview, with principles," he said.
In the coming days, President Reuven Rivlin will ask the various party leaders who they believe has the best chance to form a government.
What could this mean for Palestinians?
The secretary general of the Palestine Liberation Organisation (PLO), Saeb Erekat, tweeted after the exit polls were published that it was "obvious that settlement, occupation and apartheid have won the Israeli elections".
During the campaign, Mr Netanyahu vowed to swiftly annex Jewish settlements and the Jordan Valley in the occupied West Bank if he won a fifth term.
Such a move was made more possible after US President Donald Trump released his Middle East peace plan in January. Mr Trump said the US would "recognise Israeli sovereignty over the territory that my vision provides to be part of the State of Israel", including parts of the West Bank - a departure from past US positions.
The Palestinians, who have rejected Mr Trump's plan as one-sided, insist that all the settlements must be removed if there is to be final peace deal.
More than 600,000 Jews live in about 140 settlements built since Israel's 1967 occupation of the West Bank and East Jerusalem. The settlements are considered illegal under international law, though Israel disputes this. The US has also declared it no longer sees the settlements as illegal.
What about Mr Netanyahu's trial?
A wily political operator, Mr Netanyahu is known to his supporters as "the magician" for his ability to defy sceptics.
He fought this election under the cloud of criminal proceedings, as he is due in court on 17 March to face charges of bribery, fraud and breach of trust in connection with three separate cases.
He is alleged to have accepted gifts from wealthy businessmen and dispensed favours to try to get more positive press coverage.
Mr Netanyahu has strongly denied any wrongdoing, saying he is the victim of a politically motivated "witch hunt".
Even if convicted, Mr Netanyahu would not be required to step down as prime minister until the appeals process was exhausted. BBC