Prime Minister Benjamin Netanyahu won a come-from-behind victory in Israel's election after tacking hard to the right in the final days of campaigning, including abandoning a commitment to negotiate a Palestinian state.

In a pre-election blitz, Netanyahu made a series of promises designed to shore up his Likud base and draw voters from other right-wing and nationalist parties. He pledged to go on building settlements on occupied land and said there would be no Palestinian state if he was re-elected.

With 99.5 per cent of votes counted on Wednesday, Likud had won 29-30 seats in the 120-member Knesset, comfortably defeating the centre-left Zionist Union opposition on 24 seats, Israel's Central Election Committee and Israeli media said. A united list of Arab parties came in third.

It amounted to a dramatic and unexpected victory - the last opinion polls published four days before the vote had shown the Zionist Union with a four-seat advantage.

Although Netanyahu must still put together a coalition to remain in power, his victory all but guarantees that he will be given the first opportunity to form a government, putting him course to become the longest-serving leader in Israeli history.

But the promises he made to woo ultranationalist voters in the final days of the campaign, by effectively jettisoning the "two state" aim of more than two decades of Middle East peacemaking, could have far-ranging consequences, including deepening rifts with the US and Europe.

In a statement, Likud said Netanyahu intended to form a new government within weeks, with negotiations already under way with the far-right pro-settler Jewish Home party led by Naftali Bennett, the centrist Kulanu party and ultra-Orthodox groups.

The critical party to get on side will be Kulanu, led by former Likud member and communications minister Moshe Kahlon, who won 10 seats, making him a kingmaker given his ability to side with either Netanyahu or the centre-left opposition.

"Reality is not waiting for us," Netanyahu said. "The citizens of Israel expect us to quickly put together a leadership that will work for them regarding security, economy and society as we committed to do - and we will do so."

Isaac Herzog, the leader of the Zionist Union, conceded defeat, saying he had called Netanyahu to congratulate him.

From the Palestinian point-of-view, the results are a deep concern, raising the prospect of more settlement expansion on land they want for their own state in the occupied West Bank and East Jerusalem, as well as in Gaza.

If Netanyahu follows through on his pledges it would put him on a collision course with the Obama administration and the European Union, which has been weighing steps including trade measures to sanction Israel for its settlements policy. - Reuters