According to preliminary results by the Central Election Committee, both Netanyahu's Likud Party and Gantz's Blue and White Party had earned 32 seats in the 120-seat legislative body, with a simple majority of 61 required to pass laws and achieve other governmental tasks.
"The rate of voting is high in the strongholds of the left and low in the strongholds of the right, it is a disaster", Netanyahu said.
Israeli elections tend to have robust turnout. Lieberman's Yisrael Beitenu party is popular with fellow former immigrants from the former Soviet Union, who are overwhelmingly secular.
It is the first time in Israel's history that two elections have been held in the same year, after Netanyahu failed to form government following an election on April 9.
Both parties have said they will not join a Netanyahu-led government. He claimed that Arab parties "negate the existence of Israel as a Jewish and democratic state" and "glorify bloodthirsty murderers".
Early Wednesday, Gantz told a cheering rally of supporters that while it was too soon to declare victory, he had begun speaking to potential partners and hoped to form a unity government. No to corruption and yes to clean hands.
"There's no one else running who is worthy of being prime minister", said Alon Gal, a 53-year-old hi-tech manager who plans to vote Likud after previously supporting a party further to the right. "I think he is deliberately weakening possible future leaders to make sure he remains in power". "We are still waiting for the true results but one thing is clear: The state of Israel is at a historical juncture ahead of great security and diplomatic challenges and opportunities".
However, the fear (notably among left-wing voters) that Israeli democracy is under threat has grown amid concerns over expectations that Mr Netanyahu will seek coalition agreement about legislation providing immunity from prosecution while he is in office and planned reforms that would allow governments to overrule Supreme Court rulings (seen by critics as another way to keep Mr Netanyahu safe).
Gantz, a former military chief of staff, has ruled out sitting with a Netanyahu-led Likud at a time when he is expected to be indicted on corruption charges in the coming weeks.
Several polling stations in Israel were closed temporarily because of various illegal activity, officials said.
Police said the observer was replaced and the ballot re-opened without incident.
He spent election day warning he was on the verge of losing if his supporters did not turn out to vote, including in appearances at Jerusalem's main market and its central bus station, wielding a megaphone to exhort the crowds. The same issue also brought an end to the negotiations to form a new coalition, precipitating this poll.
"(The election) is very close.
He has also pledged to annex Jewish settlements in the West Bank, and a swathe of land known as the Jordan Valley (which comprises about 30% of the West Bank). That this seems even plausible owes mostly to the fact that ideological differences between Israel's parties have increasingly narrowed in past years.
Netanyahu's campaign promoted images of him jetting off to world capitals and boasting of warm relations with powerful leaders, most notably President Donald Trump.
The closely-fought elections will decide whether Netanyahu will make it to a record-breaking fifth term or end his decade-long dominance in Israeli politics. The religious Shas party has pleaded with voters to support them or face "a tragedy of generations".
"I've had enough of Netanyahu being prime minister", said Noa Binnes, a chemistry student.
As part of the eleventh-hour media blitz, Netanyahu said in an interview with Israel Army Radio that he intended "to extend sovereignty on all the settlements and the [settlement] blocs", including "sites that have security importance or are important to Israel's heritage".
Attention will now focus on Israel's president, Reuven Rivlin, who is to choose the candidate he believes has the best chance of forming a stable coalition.
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