Occupied Jerusalem: Hawkish Prime Minister Benjamin Netanyahu has claimed victory in Israel's parliamentary election, shrugging off surprise losses to centre-left challengers and vowing to stop Iran from acquiring nuclear weapons.

However, Tuesday's vote, which also disappointed religiously inspired hardliners, may deflect the premier's focus on confronting Tehran and resisting Palestinian demands as Israel's secular middle-class demanded new attention on domestic issues.

That in turn might draw Netanyahu toward a less fractious relationship with his key ally, U.S. President Barack Obama, who himself embarked on a new term this week with great ambitions.

Interim vote count results on Wednesday showed the Israeli leader's right-wing Likud and the ultra-nationalist Yisrael Beitenu would remain the biggest bloc in the 120-member assembly, but with only 31 seats, 11 fewer than the 42 the two parties held in the last parliament.

That put Netanyahu on course for a third term in office, perhaps leading a hardline coalition that would promote Jewish colonies on occupied land.

But his weakened showing in the ballot, which he had called nine months early in the hope of a strong mandate for his struggle with Iran, could complicate his efforts to forge an alliance with a stable and substantial majority in parliament.

"I am proud to be your prime minister, and I thank you for giving me the opportunity, for the third time, to lead the state of Israel," the 63-year-old leader told a cheering crowd in the early hours of Wednesday at his campaign headquarters.

Netanyahu said he planned to form as broad a governing coalition as possible, suggesting he would seek partners beyond his traditional ultra-nationalist and religious allies. His first call may be to Yair Lapid, a former television anchorman whose centrist, secular party came from nowhere to second place.

"The first challenge was and remains preventing Iran from obtaining nuclear weapons," Netanyahu said.

Iran denies it is planning to build an atomic bomb, and says Israel, widely believed to have the only nuclear arsenal in the Middle East, is the biggest threat to the region.

Netanyahu views Tehran's nuclear programme as a threat to Israel's existence and has stoked international concern by hinting at possible Israeli military action to thwart it.