His apparent victory comes despite impending corruption charges. Likud and its allies could end up with about 65 seats in the 120-member body.
Trump is expected to finally present a long-delayed peace proposal in the coming months. In any case, the country faces what could be weeks of political negotiations over the composition of a ruling coalition.
But under almost every scenario, Netanyahu was the big victor.
The Blue and White party, headed by former army chief of staff Benny Gantz, drew even with Netanyahu's Likud party, but the incumbent prime minister is poised to form a government with his larger bloc of allies.
Mitchell Barak, an Israeli political pollster and analyst told Al Jazeera it's a remarkable achievement for a party to obtain 35 seats, referring to both frontrunners.
More than 40 parties vied in Tuesday's election with turnout hit around 61% of eligible voters.
Long-time Israeli leader Benjamin Netanyahu looked set to win an historic fifth term as prime minister after a neck-and-neck election result.
Other Arab voters said they feel disenfranchised and that under Benjamin Netanyahu's multiple terms as prime minister, they were discriminated against and did not have a voice. The close race between the two main parties had led to uncertainty after polls closed on Tuesday night and exit surveys were released. "I'm very touched that, for the fifth time, the people of Israel have believed in me".
But even then Netanyahu appeared best placed to form a coalition, with both parties falling far short of an outright majority. Arab leaders accused Netanyahu of demonizing the country's Arab community, which is about 20% of the population. Having moved the United States embassy from Tel Aviv to Jerusalem, and ended funding to the UN agency supporting Palestinian refugees, Mr Trump announced, with nakedly political timing, that the U.S. would recognise Israel's sovereignty over the Golan Heights, captured from Syria in 1967. "I think we have a chance and I think we now have a better chance", he added. Recent opinion polls show a tight race between Gantz's centrist Blue and White with about 30 seats and Netanyahu's right wing Likud with some 28 seats.
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Tel Aviv Stock Exchange main indexes were up almost 1 percent in late trading on Wednesday, displaying confidence in a veteran prime minister who has overseen a humming economy and blunted various security threats, including from Syria.
On Wednesday, Gantz wrote this message to his supporters, according to The Associated Press: "Though the skies appear gloomy, nothing is final".
"The skies may look overcast.but they can not hide the sun of hope that we have brought to the Israeli people and society", Gantz, 59, wrote in an open letter to supporters.
"They want their occupation to be endless", he said.
Gantz, a 59-year-old former general, frequently attacked Netanyahu during the campaign over allegations of corrupt behaviour by the longtime prime minister. "They got such a big number of votes through the statements against Netanyahu". On Sunday, he promised to annex Jewish settlements in the occupied West Bank should he win the election.
Ahmed Majdalani, an aide to Palestinian President Mahmoud Abbas, said the Palestinians will seek the help of the worldwide community to try to block any such plans.
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Palestinian official Saeb Erekat lamented that the Israelis voted to maintain "the status quo". "They have chosen an overwhelmingly right-wing, xenophobic and anti-Palestinian parliament to represent them", she said.
Netanyahu had campaigned in the election against ex-military chief Benny Gantz.