While Netanyahu won decisively, a relatively strong showing by Moshe Feiglin suggested that many Likud voters consider the prime minister too soft on peacemaking with the Palestinians.

Netanyahu won more than 75 per cent of the vote.

In his victory speech, he said: "Likud will continue leading the country responsibly.

"We face great challenges that no other country in the world faces and I believe we will overcome them together in the way of the Likud."

On taking office in 2009, Netanyahu reluctantly embraced the concept of an independent Palestinian state, antagonising hard-line Likud loyalists who believe Israel should hold on to the West Bank for religious and security reasons.

The new housing subsidies offered to West Bank settlers appeared to be aimed at appeasing those hardliners.

The Israeli move threatened international efforts to revive peace talks and drew angry condemnations from the Palestinians.

"They are adding obstacles when everyone is intensifying efforts to try to resume peace talks," said Palestinian spokesman Ghassan Khatib.

Low-level peace negotiations hosted by Jordan ground to a halt last week, in large part because of Palestinian objections to Israeli settlement construction.

UN Secretary General Ban Ki-moon visited Jordan on Tuesday en route to Israel and the Palestinian Authority in an effort to keep the dialogue moving.

"We must all do our part to break this impasse," Ban said. "In the short term, it is essential that provocations stop as called for by the Quartet and that the parties build confidence and sustain these nascent talks."

This week's decision in Jerusalem approved housing subsidies and loans for 557 communities deemed "national priority areas".

An announcement in English made no mention that West Bank settlements were included in the order. But attached to the Hebrew announcement was a list that included 70 settlements, most of them deep inside the West Bank.

The incentives, according to the prime minister's office, are "meant to encourage positive migration to these communities".

Jubilant after his success at the poll, Netanyahu said: "We proved that our strength is in our unity. We will continue to lead responsibly for better education, economy, and security for all the citizens of the State of Israel.

"Likud turns Israel into one of the most developed nations in the world, in education, culture, and environmental protection."

Contrary to some expectations, not only did Netanyahu not announce a general election but he predicted that there is "still time" before general elections take place.

"We are standing before great challenges," the prime minister said.

"I am convinced that we will tread forward in our way, the way of the Likud."

Only about half of the Likud's 125,000 eligible voters came out to polling stations across the country due to a combination of poor weather, irregularities with the voting and political deals.

In an act of desperation, Netanyahu pleaded with people to vote. He then toured polling stations in the South while calling eligible voters along the way.

Feiglin said: "Even if I don't win this election, this contest will be an important step on the way to my path to the victory that will eventually come.

"I have a bad feeling that efforts were made to prevent my supporters from voting.

"But the truth will win, and we will have Jewish leadership despite all the tricks and shticks."

A spokesman for Feiglin reported that his loyalists were illegally prevented from being present when votes were counted.