Coalition talks have begun in Israel after near-complete general election results gave right-wing and centre-left blocs 60 seats each in parliament.
President Shimon Peres is expected to ask Prime Minister Benjamin Netanyahu to attempt to form a new government.
His Likud-Beitenu alliance lost a quarter of its seats in the Knesset but remains the largest grouping with 31.
He has offered to work with the newly-formed Yesh Atid party, which shocked observers by coming second with 19.
However, its leader, popular former TV presenter Yair Lapid, has demanded reform of a law under which ultra-Orthodox Jewish seminary students can defer their military service. Religious parties in the current governing coalition are strongly opposed to any changes.
Mr Lapid has also said he would only join a government that was committed to reviving the peace process with the Palestinians.
“Whoever wants Yesh Atid in the coalition will need to bring these things,” Ofer Shelah, a senior member of the party, told Israeli Army Radio.
On Wednesday morning, Israeli media reported that with 99.8% of votes counted, the joint electoral list of Mr Netanyahu’s Likud party and the ultra-nationalist Yisrael Beitenu (Israel is our Home) party of his former Foreign Minister Avigdor Lieberman had won 31 seats.
That would be 11 seats fewer than the two parties’ combined total from the last election.
The ultra-nationalist Habayit Hayehudi (Jewish Home), which rejects the notion of an independent Palestinian state, won 11 seats, as did the ultra-Orthodox religious Shas party.
The smaller ultra-Orthodox United Torah Judaism party won seven, bringing the right-wing bloc’s total to 60 of the 120 seats in the Knesset.
Yesh Atid (There is a Future), a secular centrist party which was only set up by Mr Lapid last year, had been expected by pollsters to win about 12 seats, but is set to get 19, just ahead of the Labour party with 15.