Exit polls from Israel show Prime Minister Binyamin Netanyahu's Likud party with the largest bloc of seats in the next parliament, but winning by a narrower margin than expected.

The first round of exit polls showed Likud winning 31 seats on its combined list with Yisrael Beiteinu, the right-wing party headed by Avigdor Lieberman.

Yesh Atid, a centre-left party headed by former television journalist Yair Lapid, is expected to come second with 19 mandates, according to exit polls.

Lapid's party ran on a largely socioeconomic platform in Tuesday's vote, promising to redistribute the welfare benefits offered to ultra-Orthodox Jews, and to draft them into the army. Most ultra-Orthodox men are currently exempt from military service.

The Labour party, long the mainstay of Israel's left, polled third with 17 seats; the Jewish Home party, a nationalist party headed by software mogul Naftali Bennett, was running fourth, with 12 mandates, tying it with the Shas party, which represents mostly religious Sephardic Jews.

Kadima, which won the largest share of seats in the 2009 election, did not pass the two percent vote threshold to win any seats in the Knesset.

Turnout was 66.6 percent, according to the official election committee, up from 65.2 percent in the 2009 election.

Poor showing for Netanyahu

Pre-election polls had showed Likud winning 33 or 34 seats, and they predicted that the Jewish Home party would come in second, with 16 or 17 mandates.

But surveys also found as much as one-sixth of the electorate was undecided, and those swing voters appear to have turned against the prime minister.

Netanyahu made a last-minute appeal to voters on Tuesday: Hours before polls closed, he wrote on his Facebook page, "Likud rule is in danger. I ask you to drop everything and go out now and vote. This is very important to safeguard Israel's future."

No Israeli party has ever secured a majority in the 120-seat Knesset. Netanyahu, as the head of the largest party, will now have the first opportunity to build a coalition. He will have to negotiate with Jewish Home, Yesh Atid, and other parties to form a coalition, a process which could take weeks.

His current governing coalition is built largely around right-wing and ultra-Orthodox parties, with a handful of centre-left legislators, including Defence Minister Ehud Barak.

Parties like Shas and United Torah Judaism would be a difficult fit in a coalition that includes Lapid, given his party's efforts to capitalise on secular resentment of the perks given to the ultra-Orthodox.

The prime minister was quick to thank voters after polls closed, and promised to form a government "as wide as possible."

Yesh Atid's surprising rise in the polls suggests that Netanyahu may have to move towards the centre to build a new coalition. It could also make for an unstable government: Some observers were already predicting that his government would not last the full five-year term.