In a statement posted on his Facebook page, Netanyahu said he would reach across the aisle and try to form a broad-based coalition.
"According to the exit polls, it is clear that Israel citizens decided that they want me to continue to serve as prime minister of Israel, and that I form the widest possible majority (coalition)," he said. "Already this evening I will begin working toward the widest possible government."
Such a scenario would have deep implications for Mideast peace prospects. Netanyahu's centrist opponents have said they would not join his government if he does not make a serious push for peace with the Palestinians. Peace talks have been deadlocked throughout Netanyahu's four-year term.
According to the exit polls, Netanyahu's Likud-Yisrael Beitenu bloc captured just 31 seats, far below forecasts of recent opinion polls. The two parties, running separately, had 42 seats in the outgoing house.
In the biggest surprise, the centrist "Yesh Atid," party headed by political newcomer Yair Lapid, captured as many as 19 seats, well above the forecasts. That would position Lapid to become either opposition leader or seek a major Cabinet post if he decides to join Netanyahu's governing coalition.
Lapid campaigned on a platform calling for an end to the generous subsidies and draft exemptions given to ultra-Orthodox Jewish communities. He also has said he would not serve as a "fig leaf" for a hard-line government.
Lapid would likely seek deep concessions for Netanyahu in exchange for joining the government.