Exit polls and partial results in the country’s hotly-contested election show the 69-year-old edging ahead of former military chief Benny Gantz, his main competitor.
Both sides declared victory after polls closed on Tuesday, but as the night wore on there were signs that Mr Netanyahu’s Likud party was pulling ahead.
Benny Gantz presented himself as a scandal-free alternative to Mr Netanyahu
Victory would see Mr Netanyahu earn a fourth consecutive term in office and a fifth overall, which would see him become Israel’s longest-serving leader this summer.
It would also be a boost to a leader who is bracing for the likelihood of criminal charges in a series of corruption scandals.
Mr Netanyahu’s campaign has focused on his strong relationship with US President Donald Trump and his success in fostering ties with new allies like China, India and Brazil.
Mr Gantz presented himself as a scandal-free alternative and challenged Mr Netanyahu on security issues, usually the prime minister’s strong point.
Initial exit polls indicated that Mr Gantz’s Blue and White would emerge as the largest party in a crowded field.
“Elections have losers and elections have winners. And we are the winners,” Mr Gantz told a victory rally shortly after midnight.
The political newcomer vowed to change the tone of Israel’s divisive political system and “be the prime minister of everyone, not just the ones who voted for me”.
But as the results continued to come in, Likud appeared to be growing in strength.
With more than 90% of the votes counted, it possessed a slim lead over Blue and White.
Mr Netanyahu’s party is expected to take 37 seats, one more than Mr Gantz.
Supporters of Mr Gantz’s Blue and White wave flags as exit polls emerge
Although both parties are well short of a majority in the 120-seat Knesset (parliament), the polls show that Likud and its religious and nationalist allies have a solid majority.
“It’s a night of tremendous victory,” Mr Netanyahu told his own victory rally.
“I was very moved that the nation of Israel once again entrusted me for the fifth time, and with an even greater trust.”
Mr Netanyahu said he had already started discussions with fellow right-wing and religious parties about forming a coalition.
“I want to make it clear, it will be a right-wing government, but I intend to be the prime minister of all Israeli citizens, right or left, Jews and non-Jews alike,” he said.
Coalitions are a common feature of Israeli politics, with a proportional representation voting system used.
Some 40 parties fielded candidates for the Knesset, but only those that get at least 3.25% of the votes make it into parliament.
