In a four-day 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, including a pledge to go on building settlements on occupied land and saying that there would be no Palestinian state if he is re-elected.
With 99.5 percent of votes counted, Likud had won 30 seats in the 120-member Knesset, comfortably defeating the Zionist Union opposition on 24 seats, Israeli media said.
It amounted to a dramatic and unexpected victory - the last opinion polls published four days before the vote showed the Zionist Union with a four-seat advantage over Likud, according to Reuters.
In a statement, Likud said Netanyahu intended to form a new government within weeks, with negotiations already underway with the pro-settler Jewish Home party led by Naftali Bennett, as well as with religious groups.
The critical party to get on side will be centrist Kulanu, led by former Likud member Moshe Kahlon, who won 10 seats, making him a kingmaker given his ability to side with either Netanyahu or the center-left opposition.