Exit polls for two of the three main TV channels gave both parties 27 seats in the 120-seat Knesset (parliament). A third poll had the Likud slightly ahead, 28 seats to 27.
The Joint Arab List appeared to be heading for third place, with a projected 13 seats, with the remainder made up of a mishmash of parties of the left, centre, far right and ultra Orthodox Jewish groups.
Coalition negotiations will take several weeks, with both Likud and the Zionist Union promising plum positions to the small parties.
And because of the fractured nature of the incoming parliament, these negotiations are unlikely to lead to a stable government.
Israeli political analysts suggested that unless a grand coalition between Likud and Zionist Union is set up, there will another election within 18 months.