Israelis voted Tuesday in an election likely to return Prime Minister Benjamin Netanyahu as head of a rightwing coalition that will face the challenges of peacemaking with the Palestinians and Iran's nuclear programme.

After a slow start, the pace of voting picked up, with long queues forming outside some polling stations in Jerusalem. By noon, the Central Elections Committee said 26.7 percent of voters had already cast ballots.

He called on voters to back the joint list of his rightwing Likud party and the secular nationalist Yisrael Beitenu faction of former foreign minister Avigdor Lieberman.

"Likud-Beitenu represents all the people. The stronger Likud-Beitenu is, the easier it will be to lead Israel successfully," he said.

Polling ahead of the vote has consistently projected an easy win for the Likud-Beitenu list, and Netanyahu is expected to preside over a sharply rightwing government that will be less likely to achieve a comprehensive peace deal with the Palestinians and could increase Israel's diplomatic isolation.

The Israeli government will face key diplomatic and foreign policy questions, including 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.

Polls show Likud-Beitenu winning around 32 seats, down about 10 from their current standing in the 120-seat Knesset.

The centre-left Labour party is projected to trail in second place with about 17 seats. Its chief, Shelly Yachimovich, is expected to become leader of the opposition after pledging she would not join a Netanyahu government.

The campaign's big surprise has been Naftali Bennett, the young, charismatic new leader of the hardline national religious Jewish Home.

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

Bennett's success has rattled Netanyahu, pundits say, with the premier pushing to stem the defection of voters to Jewish Home by burnishing his own credentials as a defender of Israeli settlement in the occupied territories.

In the German Colony neighbourhood of Jerusalem, a teacher who declined to give her name said she was planning to back Bennett.

"He is strong, and he is religious but not extreme. Young families... can relate to him. We are so tired of Netanyahu," said the 32-year-old.

Nitza Salman, 49, shopping at a Jerusalem mall, said she was hoping for "change," and would be voting for the secular centrist Yesh Atid party led by former journalist Yair Lapid.

"I'm voting for Lapid because I believe in him. If Netanyahu is prime minister, there needs to be people to block him, to calm him down."

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.

That has worried the Palestinians, and Hamas prime minister Ismail Haniya warned Tuesday that "the trend of the Israeli elections suggests a move from an extremist government to a more extreme government".

Some 5.65 million Israelis are eligible to vote at 10,132 polling stations.

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