Prime Minister Binyamin Netanyahu has claimed victory in Israel's national elections after campaigning strongly on national-security issues.
Official results have given Mr Netanyahu's centre-right Likud party 29 seats, compared with 24 for the centre-left Zionist Union in the 120-member parliament.
However, the Likud party will not be able to govern in its own right, and the Prime Minister has appealed to his political allies to form a coalition with him.
The election result is likely to have a significant impact on Israel's relationship with the Palestinians and the United States' Obama administration.
Mr Netanyahu enjoyed a surge in support after a last-minute appeal to his supporters to go to the polls to counter a high turnout among Arab Israelis.
They traditionally do not support his Likud party.
The United States government criticised his remarks, claiming it risked marginalising some communities.
But analysts say Mr Netanyahu is now in a stronger position to forge a coalition with his right-wing allies that would extend his six years in power.
In his victory speech to Likud supporters, the Prime Minister has promised to govern in the long-term interests of Israel.
"We achieved the huge victory for our people, and I'm proud for the people of Israel."
Mr Netanyahu's main opponent was Zionist Union leader and Labor Party chairman Isaac Herzog.
Mr Herzog had formed the Zionist Union after Labor teamed up with former Foreign Minister Tzipi Livni's centrist Hatnua Party late last year.
The Zionist Union had focused its campaign on social and economic issues at a time when many Israelis were concerned over the rising cost of living.
Mr Herzog has told his supporters he believes his opponent has rushed too soon into claiming victory and the Zionist Union could still form a governing coalition in Israel.
"Everything is open, wide open. I spoke to all the party leaders today, leaders of the different parties. We do not know what will be the final result. But we will take every effort to form a truly social government for Israel."
The election result is likely to have major implications for Middle East policy.
Mr Netanyahu has promised a re-elected Likud government would not push ahead with negotiations for a Palestinian state.
He says it would also allow the construction of more Jewish settlements in the West Bank, a move likely to generate renewed tension with the Obama administration.
Palestinian Chief Negotiator Saeb Erekat says he believes a victory for Mr Netanyahu is a major setback for peace in the Middle East.
"Mr Netanyahu's policy is no Palestinian state, continuation of settlements, and I believe, now, it's up to the international community to stop treating this prime minister as being a prime minister above the laws of man and he should be held accountable. And the international community should not cover him or give him impunity."
No party has ever won an outright majority in Israel's 67-year history.
It may, therefore, take weeks before the country has a new government, and Mr Netanyahu will remain interim leader during that time.
The Zionist Union is hoping to secure the support of a coalition of Arab Israeli parties to help it form the next government.
Arab Israeli MP Ahmed Tibi says he hopes that coalition can play a pivotal role over coming weeks.
"The joint list will be a key player in the parliament. I am sad about the results of the Likud. It seems that the Israeli society is not willing to have change, real change, in the political, social and economical reality."
Israel's president, Reuven Rivlin, will have the ultimate say in determining who is best-placed to form a coalition government.
President Rivlin will formally nominate that person, who will then have another 42 days to finalise the coalition arrangements.
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