EXIT POLLS published last night after the polls closed indicated a dramatic last-minute swing that gave the centrist Kadima, led by foreign minister Tzipi Livni, a wafer-thin victory over the right-wing Likud, led by Benjamin Netanyahu.
However, it is still not clear who will be Israel’s next prime minister as the right-religious bloc still led the centre-left bloc by a six-to-eight seat margin.
Every Israeli government in the past has been headed by the largest party but president Shimon Peres, after consulting next week with all the parties who have won seats, will ask the candidate he believes has the best chance of cobbling together a working coalition to form the next government.
A political rotation is a distinct possibility, with Ms Livni and Mr Netanyahu alternating as premier, possibly with Labor leader Ehud Barak continuing as defence minister.
The result was a political bombshell, and marks a great disappointment for Mr Netanyahu (59), who served as Israel’s prime minister between 1996 and 1999, and was the frontrunner throughout the campaign.
In light of the result, political commentators last night were already talking about the possibility that a new coalition will not last long and more elections may be likely next year.
The television predictions showed Kadima winning between 29 and 30 seats in the 120-seat Knesset, just ahead of Likud with 27 to 28 seats.
All three TV exit polls gave Kadima a two-seat lead over Likud.
In third place was the big winner of this election, the far-right Yisrael Beiteinu (Israel Our Home) led by Avigdor Lieberman, who came to Israel from Moldova.
Mr Lieberman ran a campaign that demanded a loyalty oath from Israel’s Arab minority. Yisrael Beiteinu was predicted to win 14 to 15 seats.
Labor, headed by defence minister Ehud Barak, came an embarrassing fourth, with exit polls showing the party winning only 13 seats in the next Knesset.
It appears that many potential Labor voters switched to Kadima at the last minute to prevent Mr Netanyahu becoming prime minister.
Mr Barak had indicated that anything less than 20 seats for Labor would make it difficult for him to continue as leader of the party and serve as defence minister in the next government, a scenario that polls showed was popular with the Israeli electorate.
Voter turnout was more than 60 per cent, an impressive figure bearing in mind that wintry storms covered most of Israel yesterday.
Both Ms Livni and Mr Netanyahu had indicated their preference for a national unity government made up of all the four main parties and maybe the religious Shas party.
But many in Labor will prefer to sit in the opposition rather than join a coalition with Yisrael Beiteinu.
A wide coalition is expected to emerge after weeks of political wheeling and dealing.
Palestinian president Mahmoud Abbas promised to work with any future Israeli government but stressed that Jewish settlement construction must be halted.
Meanwhile, Hamas official Osama Hamdan warned that a Likud victory could jeopardise the Gaza ceasefire talks.