Initial exit polls broadcast by three main Israeli television channels on Wednesday indicated that Netanyahu's right-wing Likud party had the lead but was likely to fail to garner enough seats to secure a parliamentary majority needed to form a new cabinet.
That will raise the possibility of continued political gridlock and an unprecedented fifth consecutive election later this year.
On Wednesday, Netanyahu claimed a "huge victory" over the opposition Yesh Atid party candidate, Yair Lapid, who has emerged as his main challenger thanks to deep divisions in the Blue and White opposition party headed by Benny Gantz.
Netanyahu described Tuesday's projected results as a "huge win for the right" and his Likud party.
"I will reach out to all elected officials who share our principles. I will not exclude anyone," he told supporters enthusiastically.
But projections based on exit polls did not bear that victory announcement out.
Meanwhile, Lapid has also claimed that his party has a path to a majority cabinet.
"At the moment, Netanyahu doesn't have 61 seats," he said addressing supporters in Tel Aviv.
Lapid said he had "started speaking to party leaders and we'll wait for the results but we'll do everything to create a sane government in Israel."
Netanyahu's only path to a viable right-wing coalition appears to rest on a deal with the head of far-right Yamina party, Naftali Bennett.
Bennett's Yamina party is forecast to win seven seats in the 120-member Knesset.
Even if Bennett's projected seven seats technically enable Netanyahu to cobble together a cabinet, there is no guarantee the two will unite.
If Netanyahu can't reach a deal with Bennett and his opponents cannot unite, a fifth election is possible.