Israel's new prime minister, Benjamin Netanyahu, has 45 days to present a coalition government to the Knesset, the parliament.
Shimon Peres will continue as prime minister until the new government is confirmed.
Mr. Netanyahu, who will be Israel's youngest prime minister and the first directly elected, won 50.4 percent in the May 29 election. Mr. Peres won 49.5 percent. The difference was a mere 30,000 votes out of 3 million cast.
But Netanyahu won 61 percent of the votes cast by Jews compared with 39 percent for Peres, who was heavily backed by Israel's Arab voters.
A surprise 77 percent turnout by the Arabs - who make up about 12 percent of the total electorate - was not able to counter the solid ultra-Orthodox Jewish vote for Netanyahu.
In the separate election for Knesset (parliament), the incumbent Labor Party won 34 seats while a coalition led by Netanyahu's right-wing Likud won 32. Included in this coalition are David Levy's Gesher Party and Rafaek Eitan's right-wing Tsomet Party. Each of these parties gained five seats by prior agreement with Likud.
So, Netanyahu's party has only 22 out of 120 Knesset seats.
Counting all of Likud's natural allies - the National Religious Party (10), the United Torah Judaism (4), and the right-wing Moledet (2) - the right-wing parties captured 47 seats.
So-called pro-peace parties - Labor (34), Meretz (9), Hadash (5), the United Arab List (4) - tallied at 52 seats.
The remaining 21 seats are in the hands of so-called swing parties which did not endorse one or other of the prime ministerial candidates: the pro-immigrant party of Israel Be'Aliya (7), Shas (10), and Labor's breakaway group, the Third Way (4).