His main rival, Zionist Union’s Isaac Herzog, called the incumbent leader and congratulated him, Israeli media reported.
With nearly all votes counted, Netanyahu’s Likud party has at least 29 seats in the 120-seat Knesset, according to unofficial numbers from the Israeli election committee.
Zionist Union has 24 seats, it said.
Israel’s ballots are for political parties rather than individual candidates. No party has ever won a majority, but the victory goes to the party leader most suited to put together a 61-seat majority with coalition parties.
While a new government must be negotiated through the President’s office, the results increase the ability of Netanyahu to form a majority coalition out of the 120 seats.
An optimistic Netanyahu claimed victory shortly after polls closed.
“Against all odds, we achieved this huge victory,” Netanyahu told cheering supporters. “Now we should form a strong and stable government that will be able to take care of the security, safety and welfare of each and every citizen of Israel.”
Official results will not be released until next week, with the process of building coalitions expected to take much longer.
Before the unofficial results, the opposition said it was time for a new leader.
“Israel is tired of nine long years of Netanyahu,” said Gabriel Sassoon, foreign communications adviser for the Herzog campaign.
Before polls closed Tuesday, Netanyahu released a video on his Facebook page urging his supporters to vote. He suggested that leftists are bringing “huge amounts” of Israel’s Arab citizens to the polls to vote against his Likud party.
“The right regime is in danger, the Arab voters are coming in huge amounts to the polls,” Netanyahu said. “The leftists are bringing them (Arabs) in huge amounts to polls using buses. … We have an urgent wake-up call.”
Arabs make up about 20% of Israel’s population. According to the early exit poll estimates, an Arab coalition ranked as the third largest party.
Netanyahu’s statement “clearly shows he is feeling the pressure,” said Moshe Kahlon, a former Likud minister who now heads the Kulanu party.
“These remarks were inappropriate and regrettable,” Kahlon said.
But CNN’s Elise Labott said the “stunning turnaround” may have been a result of Netanyahu’s sharp turn toward the right during the final days of the campaign.
“It seems to have worked. He seems to have energized that right-wing base … even inching a little bit ahead of him,” she said.
President Reuven Rivlin said a ruling government will be set up as soon as possible.
“The President will work with all the election bodies to start the consultations process ASAP. We hope to start as soon as Sunday,” his office said in a statement.
Netanyahu made a hard right turn during the last few days of campaigning, including saying there will be no Palestinian state under him and vowing to expand settlements on occupied land.
His pre-election change was aimed at boosting his Likud base and attracting voters from the right-wing parties.
Some polls had predicted that Likud party would finish in second place behind the Zionist Union. Earlier exit polls predicted the two tied neck-to-neck.
CNN’s Oren Liebermann reported from Jerusalem, and Faith Karimi wrote and reported from Atlanta. CNN’s Larry Register, Dana Ford and Kevin Flower contributed to this report.