Israeli Foreign Minister Tzipi Livni led exit polls after yesterday's parliamentary election but her Kadima party's two-seat lead over right-winger Benjamin Netanyahu left it too close to call who would be Prime Minister.
An overall rightward shift in Parliament, however, is likely to dent the hopes of the administration of US President Barack Obama in Washington for a new Israeli coalition that can make major strides forward in making peace with the Palestinians and other Arab neighbours.
Whatever the final outcome, which could take until well into today to confirm, the poll findings suggested a dramatic triumph for the 50-year-old Mrs Livni, bidding to become Israel's first woman leader since Golda Meir in the 1970s, and a sharp rebuff to former premier Netanyahu, the long-time favourite.
His Likud party had seemed to be cruising to victory until Mrs Livni and her centre-left coalition launched a three-week offensive in the Gaza Strip in late December that won popular support in Israel despite an international outcry over the 1,300 Palestinians killed in the Hamas-ruled enclave.
Exit polls on three Israeli television channels showed Kadima retaining around its present 29 seats in the 120-seat, single-chamber Knesset, with Likud two seats behind.
At Kadima's campaign headquarters, Livni supporters cheered and danced.
However, some analysts noted that soldiers, whose votes could account for a couple of seats, had not been counted in exit polls and that could favour Mr Netanyahu as tallying continues today.
One television station put the right-left split at 64 seats for the right to 56 for the left, which could deny Mrs Livni the premiership and persuade President Shimon Peres to ask Mr Netanyahu to try to form a coalition government.
Overall, exit polls seemed to confirm a general rightward shift, including a surge for far-rightist Avigdor Lieberman, whose rise to 14 or 15 seats from his current 11 was seen by some analysts as a factor in Likud's poor showing. Mark Heller, a strategic analyst at Tel Aviv University, said of Mrs Livni's strong performance: "It shows a lot of people were at the last minute frightened off by the idea of Mr Netanyahu being prime minister. "Netanyahu felt the right-wing parties nipping at his heels and he shifted his own focus to the right to head that off, and thereby lost some votes in the centre."
As expected, no party secured more than a quarter of the 120 seats in Parliament, ushering in several weeks of negotiations on forming a coalition government. About a dozen parties are expected to sit in the Knesset.
President Peres, a former centre-left prime minister who has largely symbolic powers, will nominate a legislator to try to form a government.
Traditionally, that has been the leader of Parliament's largest party. It is possible, however, if smaller parties express a clear preference that Peres could nominate someone else.
Whoever is chosen has six weeks to form a government.
Mrs Livni's failure to cobble together a new coalition in November following the resignation of her predecessor as Kadima leader, Ehud Olmert, triggered yesterday's election, which came more than a year ahead of schedule.
Expanding beyond his core support among fellow immigrants from the former Soviet Union, Mr Lieberman's hard-line approach to Palestinians and Israel's own 20 per cent Arab minority struck a chord with many disillusioned with a flagging peace process.
The Labour party of Defence Minister Ehud Barak, a former Prime Minister, trailed in fourth place with 13 seats, according to three exit polls, down from 19 in the outgoing parliament.
The party of Israel's founders and the dominant force for its early decades, Labour has suffered from the general rightward shift of the electorate.
Mrs Livni led peace talks with the Palestinians on a two-state solution, which stalled last year but which US President Barack Obama wants to resume. Mr Netanyahu has been cooler on ceding occupied territory to Palestinians.
Mrs Livni once worked for the Mossad intelligence agency, a fact she has stressed in her campaign to counter suggestions that as a woman she might not be strong enough for the challenges Israel faces from its Arab neighbours and Iran.
Mr Olmert will stay on as caretaker premier until a new Cabinet is sworn in.