Netanyahu holds a slim lead over rival Benny Gantz and is likely to be able to form the next government.
During the election campaign, Netanyahu highlighted his close relationship with Trump, erecting billboards showing the two leaders smiling and shaking hands.
Netanyahu appeared poised for a historic fifth term as prime minister with almost all the ballots counted from Tuesday's vote.
With more than four million votes counted as of 9 a.m.(Israeli time), Likud had snagged 26.27 per cent of the vote, or 35 seats in the 120-seat legislature - the party's best result since the 2003 election (when it won 38 seats under Ariel Sharon), and its best under Netanyahu. The Palestinians have severed ties with the Trump administration.
The peace plan is being developed by Mr Trump's son in law, Jared Kushner. Israel is governed by coalitions of parties, so the total number of the right- and left-wing blocs matter more than the size of the biggest party. That responsibility is usually given to the head of the largest party. Rivlin will then task the leading candidate with forming a government within 42 days. If he is re-appointed prime minister, he'll be the longest-serving prime minister in Israel's history. The Israeli public has had its say! The prime minister, however, secured a path to reelection by having a clear right-wing majority in the Knesset. Palestinians, angered by what they see as Trump's pro-Israel bias, have called it a non-starter.
In the end, voters kept to the right in granting a fifth term to a leader who has a reputation for getting things done, despite an array of former generals who stood against him - and were dismissed by Netanyahu as the "weak left".
Speaking after preliminary results were announced early Wednesday, Netanyahu hailed a "magnificent victory".
"Nevertheless, the party is more inclined to ally itself with the right, which gives Netanyahu 8 more mandates".
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In fact, the outcome of Israel's elections essentially confirms what we knew.
The latest results indicate that Naftali Bennett and Ayelet Shaked's the New Right party has received some 127,000 votes, putting them some 4,300 votes (and 0.11%) below the 3.25% threshold and making them the only party with a chance to still enter the 21st Knesset. He served as defense minister during the term of the outgoing government but resigned in November saying that he wanted a stronger response to a barrage of air attacks from the Gaza Strip.
The Palestinian issue and prospects for peace negotiations were notably absent from political debate this election. As a last minute campaign pledge, Netanyahu even promised the annexation of the West Bank. Trump further aided Netanyahu politically by recognizing the contested Golan Heights as an Israeli territory and refusing to condemn Netanyahu's pledge to annex Jewish settlements in the West Bank in the election's home stretch.
The minister told Turkey's NTV news channel on Wednesday that Israel "must put aside the populism and the rhetoric, it must abandon its aggressive stance".
The last round of US-brokered peace talks between Israel and the Palestinians collapsed in 2014.
Palestinian official Saeb Erekat lamented that the Israelis voted to maintain "the status quo".
In response, an aide to Palestinian President Mahmoud Abbas said it would look to the worldwide community for help blocking an annexation.
Almost complete results in the tight election put Mr Netanyahu in position to form a narrow parliamentary majority with a coalition of right-wing and religious parties, allowing him to become Israel's longest-serving prime minister.