AS early exit polls showed Primer Minister Mr Shimon Peres the apparent winner in the Israeli leadership contest, Mr Benjamin Netanyahu, who later seemed to lead the poll, appeared before Likud party workers in Tel Aviv and refused to concede defeat.
Labour party officials said Mr Peres would not appear in public until he was sure of the outcome of the election, seen as a test of his land for peace policies with Israel's Arab neighbours.
Mrs Leah Rabin, widow of Peres's assassinated predecessor Yitzhak Rabin, said the Labour leader was optimistic.
"He said he was optimistic and he will wait but hopes that tonight he will be able to declare victory," Rabin said after speaking to Peres.
Channel Two television gave Mr Netanyahu the lead, 50.8 per cent to 49.2 per cent, based on a count of two thirds of the actual votes cast at polling stations where it had conducted its exit surveys.
Channel One said the race was still too close to call but Netanyahu would receive 50.4 per cent of the vote to 49.6 per, bent for Peres.
Counting began as soon as polls dosed at 10 p.m. local time but official results were not expected for many hours.
The exit polls forecast Labour would win 35 seats in the 120 member parliament compared with 44 previously. Likud would drop from 40 seats to 31 or 32, the polls said.
Channel One earlier said Peres had enough support to form a coalition government with left wing, Israeli Arab and Jewish religious parties.
The big winners in parliament were the Jewish ultra Orthodox Shas party, the National Religious Party (NRP), and a new party of immigrants from the former Soviet Union headed by former dissident Natan Sharansky.
Shas, forecast to rise to nine from six seats, said it would go into government with either party. Shas was in Rabin's cabinet until 1993. Another potential Peres ally is Sharansky's Yisrael Ba Aliya party which has come from nowhere to take a forecast seven seats.
Labour party workers burst into shouts of "Victory, victory" when the exit polls were flashed on television. Likud supporters were downcast but perked up when the lead in poll projections changed hands during the night.
Shas supporters in their distinctive black garb were, ecstatic, dancing with their leader Arye Deri, a charismatic politician who has survived a corruption scandal.
Netanyahu said the election result was still open.
"It is still early. The night is still long," he told supporters at Likud Tel Aviv headquarters. "We need to be patient. There are no final results yet. The race is very, very close."
Sounding subdued, the 46 year old Netanyahu appeared only briefly alongside former Likud Foreign Minister David Levy and soldier turned politician Yitzhak Mordechai, urging supporters to "wait with iron nerves".
Mordechai then urged everyone to go home as Netanyahu left the hall.
The Central Elections Committee said 79.7 per cent of Israel's 3.9 million eligible voters cast, ballots in the elections for a party, and for the first time, for" prime minister.
Israel Radio, reporting on the final vote count, said 3,035,000 of the eligible 3,933,250 voters had cast ballots. In 1992, when Rabin won, a total of 77.4 percent voted 79.7 percent voted in 1988.
The radio said 80 percent of the eligible Jewish voters and 77.5 percent of the eligible non Jewish voters had cast ballots.
Meanwhile in New York, American Jewish leaders publicly vowed to support whoever won the election but privately many hoped Shimon Peres's lead held so the peace process could continue.
While Peres may be controversial at home, his efforts for peace have won wide support from American Jewish groups who have also lavished praise on the Clinton administration for backing the peace process.
"If Peres wins - and that is a big if right now as the election is still very close - the American Jewish community will be breathing a sigh of relief even though we are committed to supporting, whoever forms a government, one prominent US Jewish leader said.