Israelis voted on Tuesday in an election seen as returning Prime Minister Benjamin Netanyahu to power in a rightwing coalition charged with tackling the key issues of peace talks and Iran's nuclear drive.

Long queues formed outside several polling stations in Jerusalem and Tel Aviv after a slow start, with turnout standing at 63.7 percent just two hours before polls were to close at 2000 GMT, according to the Central Elections Committee.

Throughout the day, participation figures have been consistently higher than in the two previous elections in 2006 and 2009.

Polling ahead of the vote had projected an easy win for the joint list fusing Netanyahu's Likud with the hardline nationalist Yisrael Beitenu, although they are only expected to win about 32 mandates, just over a quarter of the 120 seats in parliament.

The vote is likely to usher in a more rightwing government, which will be less inclined to seek a peace deal with the Palestinians and could increase Israel's international isolation, analysts say.

As voting entered the final stretch, Netanyahu posted a worried-sounding message on his official Facebook page, although it was not clear whether it was a case of last-minute electioneering.

"The Likud's rule is in danger. I ask that you leave everything and go out to vote (Likud) now. This is very important, to ensure Israel's future," he wrote.

There was also a lot of noise on Twitter and in the press about a higher-than-expected showing for Yair Lapid, head of the new centrist Yesh Atid party that has made few waves during the campaign.

"Bibi failed to realise that Lapid is his main rival, and not Bennett. Lapid campaigned under everybody's radar," tweeted Aluf Benn, editor of the left-leaning Haaretz newspaper, using Netanyahu's nickname.

The charismatic 40-year-old Naftali Bennett is the new leader of the far-right national religious Jewish Home party.

The new government will face key diplomatic and foreign policy questions, including how to handle Iran's nuclear programme, which much of the world believes masks a weapons drive, and a Middle East profoundly changed by the Arab uprisings.

But domestic challenges will be no less pressing, with a major budget crisis and austerity cuts on the horizon, even as Israelis express widespread discontent over spiralling prices.

Opinion polls showed Likud-Beitenu winning between 32 and 35 seats, down from the 42 they now hold but well above the 17 likely to be won by the closest contender, the centre-left Labour party.

Labour leader Shelly Yachimovich is expected to become the new opposition leader after pledging she would not join a Netanyahu government.

Jewish Home, which firmly opposes a Palestinian state and won just three seats in 2009, is on course to win 15, making it the third-largest bloc in parliament and a likely partner in any future coalition government.

Among settlers, who make up about four percent of the electorate, there is a clear preference for Bennett and the extremist Otzma LeYisrael party, although some remain faithful to Likud.

"Between Likud, Bennett and Otzma LeYisrael, we have some very good candidates," explained Daniel Hizmi from the hardline settler enclave in the Palestinian city of Hebron, whose residents are confident the new government will be strongly pro-settlement.

Election day is a public holiday in Israel.

In Tel Aviv thousands packed the beaches to enjoy a snap of unseasonably warm weather, but voting stations were also busy as people turned out to cast their ballots.

"Until I got here I was hesitating but my late mother was a Likudnik ... (so) my hand did the voting for me," said Shmulik Kaplan, 62, who admitted he was also unsure -- until he entered the polling booth.

Others voted for change.

"I believe in the left," said Maya Williams, who had come to vote with her husband.

"The main thing is anything but Bibi (Netanyahu), and Meretz is the farthest from that you can get," she said, referring to the leftwing party that is seen winning up to six seats.

In Jerusalem's trendy German Colony neighbourhood, a 32-year-old teacher expressed similar frustration, but said she would vote for Bennett.

"He is strong, and he is religious but not extreme," she said, without giving her name. "We are so tired of Netanyahu."

Polls suggest the rightwing-religious bloc will take between 61 and 67 seats, compared with 53 to 57 for the centre-left and Arab parties.

Some 5.65 million Israelis are eligible to vote.

Voting ends at 2000 GMT, and exit polls will be broadcast immediately afterwards.