Preliminary results show Gantz's Blue and White Party held a one-seat lead in the Knesset early Wednesday over incumbent Netanyahu's Likud Party.
More than 90 percent of ballots had been counted. If the current split holds, whoever wins may not be able to form a majority government.
By 4 p.m. Wednesday, the Blue and White Party had recorded 25.7 percent of the vote and the Likud Party 25 percent. Gantz, if the figures hold, would be expected to be chosen as the next Israeli prime minister -- a post Netanyahu has held since 2009.
The Blue and White Party is projected to win 32 seats and Likud 31. By early Wednesday afternoon, about 25,000 votes separated the two with fewer than 500,000 ballots left to count.
Israel's three main television news channels were projecting a victory for Gantz's party. In a speech Wednesday, the challenger said the era of "polarization and antagonism" is over and pledged to bring "unity and reconciliation" to Israeli politics.
The right-wing bloc that includes Likud, Yamina, UTJ and Shas is projected to win 55 seats in the Knesset, down from the 60 it secured in the last vote in April. The left-wing bloc, led by Gantz's party, is projected to win 56. If neither secures the 61 seats needed for an outright majority, Israel could stage a third election.
Despite the odds, Gantz said he has already started the process of building a "broad unity government."
"I intend to talk to everybody, starting tonight," he said.
The Knesset dissolved and Netanyahu ordered the Tuesday election after he was not able to form a coalition government following the vote in the spring.
Netanyahu, his voice hoarse from campaigning, did not concede when he spoke to supporters Wednesday.
"Israel needs a strong, stable, Zionist government committed to Israel as a national state for the Jewish people," he said.
The tallies varied greatly among Israel's largest cities. In Tel Aviv, 43 percent of voters favored the Blue and White Party and just 19 percent the Likud Party. In Jerusalem, 25 percent of votes went to the Ashkenazic-haredi UTJ party, 23 percent to Netanyahu's and 12 percent to Gantz's.