With 92.6% of the vote counted in Monday's elections, Benjamin Netanyahu's Likud has won 36 seats in the 120-member Knesset, despite earlier results putting the party on 35 seats.
The previous downturn meant the right-wing bloc was on 58 seats, meaning it was three MKs short of being able to form the stable right-wing and religious coalition he seeks.
The updated count also sees the predominantly Arab Joint List back to 15 seats from 16.
This means that Netanyahu's right-wing bloc is now two MKs short of the 61 that he needs to form a government.
The center-left bloc headed by Blue & White leader Benny Gantz remains unchanged.
Netanyahu's Likud emerged victorious after Monday's elections with exit polls initially showing his bloc winning 60 seats and his party winning 37. Blue & White was predicted to win between 32 and 34 seats, with the center-left bloc claiming just 54 MKs.
According to the Central Elections Committee, all polling stations have been counted and results are being calculated and reviewed and will be published Tuesday.
These results will not include an estimated 340,000 votes from military polling stations, the votes of diplomats overseas and the tally from special polling stations including more than 4,000 votes from voters in quarantine due to exposure to coronavirus.