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Opinion polls and political reports indicate it will be a neck-and-neck race between the Prime Minister candidates, Binyamin Netanyahu, leader of the right-wing opposition Likud party, and foreign minister Tzipi Livni, who heads the centrist Kadima, the largest party in the Ehud Olmert-led cabinet.
The ultra-nationalist party Yisrael Beiteinu, founded by Russian immigrant Avigdor Lieberman, is expected to make a strong showing, while polls show that support for Defense Minister Ëhud Barak's center-left Labor Party is at an all-time low.
Prominent leaders had a hectic last-minute campaign for votes with public appearances around the country on the eve of the parliamentary elections.
In a rare political scenario, Israel's conflict with the Palestinians has eclipsed all the domestic issues in the run-up to the election in the wake of a war that dealt a heavy blow to Gaza militants.
Livni has pledged to resume peace talks with the Palestinians if she becomes the Prime Minister.
The Kadima party, according to the latest polls, is slightly behind the Likud.
"I believe in the peaceful process started in Annapolis. I have been the chief negotiator from the Israeli side for a year. We agreed on the parameters of future agreements, and my goal is to resume the suspended talks," Livni told Russia's state-owned news agency RIA Novosti.
She insisted on the idea of "two states for two peoples living side by side in peace and security rather than to implement different economic projects."
The 50-year-old Livni is regarded as a moderate politician when it comes to the Palestinians and dealing with Iran's nuclear ambitions.
Netanyahu, who blames the Kadima party's "blind policy on Gaza" for the current situation, has promised that if his Likud party comes into power, it would overthrow the Hamas regime in the Gaza Strip.
Visiting the Golan Heights on Sunday, the former Prime Minister said he would not hand the territory, occupied by Israel since the 1967 Arab-Israeli war, back to Syria, in line with his party's policy on security.
He also advocates economic development for the Palestinians as a necessary pre-condition for peace talks.
Despite being a coalition partner, Labor party chief Barak called on the voters aligned with the Left not to vote for Kadima.
During a tree-planting ceremony at Kibbutz Mishmar Hasharon, he said he would not accept the defense portfolio unless his party receives 20 seats in the 120-seat Knesset.
Livni and Barak were key members of the core group of Israel's security cabinet that took important decisions before and during the 22-day-old war on Gaza militants.
It is estimated that the cost of the Gaza conflict for Israel was about the same as the cost of a day in Iraq for the U.S.
The Olmert government has not paid enough attention to its economy prioritizing the Gaza war and its relations with the Palestinians.
Irrespective of the outcome, the country's economic problems will add to the next Israeli Prime Minister's headaches, reports say.
Meanwhile, Palestinian Authority President Mahmoud Abbas said he would cooperate with the next Israeli government no matter who wins Tuesday's parliamentary election. Speaking at a press conference in the Polish capital Warsaw, Abbas said he hopes the next Israeli cabinet will act to end construction in the occupied West Bank.
A premature election to the Israeli parliament, the Knesset, was necessitated after Livni failed to form a new coalition cabinet following the resignation of Prime Minster Olmert.
Besieged by corruption allegations, Olmert stepped down as the ruling party's leader in September and as the Prime Minister, later. However, he stayed on as caretaker Prime Minister.
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