Benjamin Netanyahu swept to a stunning election victory on Wednesday, securing a third straight term for an Israeli leader who has deepened tensions with the Palestinians and infuriated key ally Washington.
After a close-fought campaign, Netanyahu's rightwing Likud party confounded expectations and won 30 of the 120 seats in parliament, against 24 for rivals the centre-left Zionist Union.
It was a victory that Netanyahu himself described as "against all the odds", proving him once again to be Israel's master of political brinkmanship.
In a symbolic visit to the Western Wall, the holiest site for Jewish prayer, Netanyahu gave thanks for his reelection.
"I am moved by the weight of the responsibility the people of Israel have placed on my shoulders," he said.
"I appreciate this decision, of the citizens of Israel, to elect me and my partners."
But the prospect of a new term for the hawkish premier, who lurched further to the right during the campaign, is likely to cast a long shadow over Israel's shattered relationship with the Palestinians and its strained ties with the US administration.
Although the Palestinians had harboured little illusion the vote would bring about any fundamental change, they said the prospect of yet another Netanyahu government would spur them to accelerate their already-advanced diplomatic campaign for statehood.
Chief Palestinian negotiator Saeb Erakat pledged to "speed up, pursue and intensify" all diplomatic efforts, including an imminent move to lodge a complaint against Israel for alleged war crimes at the International Criminal Court in The Hague.
Palestinian president Mahmud Abbas is ready to work with any Israeli government that supports Palestinian statehood, his spokesman said.
"It doesn't matter to us who the next prime minister of Israel is, what we expect from this government is to recognise the two-state solution," Nabil Abu Rudeina said in a statement.
In a last-minute campaign appeal to the Israeli far-right, Netanyahu had ruled out the establishment of a Palestinian state if reelected, effectively reneging on his 2009 endorsement of a two-state solution.
He also pledged to build thousands of homes for Jewish settlers in Arab east Jerusalem -- which Israel seized in the 1967 Six-Day War -- to prevent future concessions to the Palestinians.
But experts said he could row back from his hardline positions.
"I put much more stock in his actual behaviour and we know that he has agreed on numerous occasions to negotiate with the Palestinians on the basis of the 1967 borders," said Nathan Thrall of the International Crisis Group.
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"He has never quite admitted that publicly but on several occasions he has done so in private."
EU foreign affairs head Federica Mogherini called for a fresh start in Israeli-Palestinian relations.
"It's time to turn the page," she said in a statement.
"More than ever, bold leadership is required from all to reach a comprehensive, stable and viable settlement of a conflict that has already deprived too many generations of peace and security."
Zionist Union leader Isaac Herzog had pledged to resume talks with the Palestinians in a bid to end the conflict.
Netanyahu had argued he was the only one capable of protecting Israel from an Iranian nuclear threat, but Tehran dismissed his victory, saying the other Israeli political parties were no different.
"They all have an aggressive nature and all are the same to us and partners in atrocities against Palestinians, in plotting against Muslim nations and neglecting their rights," said foreign ministry spokeswoman Marzieh Afkham.
In Tel Aviv, Herzog conceded defeat and congratulated the premier on winning a third consecutive term, and a fourth overall.
Netanyahu will form a new government "within two to three weeks," his party said, adding that he had already spoken overnight with rightwing and religious party leaders whose support he will need to form a coalition.
- A stunning turnaround -
Under Israeli law, the final election results must be published within eight days of the vote, but a spokesman for the Central Elections Committee told AFP they were expected on Thursday afternoon.
President Reuven Rivlin then has seven days to entrust a party leader -- almost certainly Netanyahu -- with the job of forming the next government.
Under Israel's electoral system, the prime minister is not the leader of the party that gains most seats but whoever can build a coalition commanding a majority of at least 61 seats in parliament.
Netanyahu is likely to favour a narrow rightwing coalition but for that he will need the support of kingmaker Moshe Kahlon, a Likud defector whose newly formed centre-right Kulanu party won 10 seats.
The Joint List, which groups the main Arab parties, made a strong showing with 14 seats, making it the third-largest alliance in parliament.