Kadima, led by Tzipi Livni, the foreign minister, is neck-and-neck with Likud, with the last opinion polls ahead of the election predicting it to win between 23 and 25 seats, while Likud is likely to win between 25 and 27.
Third in the polls is Yisrael Beiteinu, led by Avigdor Lieberman, whose campaign slogan "no loyalty, no citizenship" has angered Palestinian-Israelis who he proposes should take an oath of loyalty to Israel and be willing to perform military service before being granted citizenship.
Al Jazeera's Mike Hanna, reporting from Jerusalem, said no opinion polling is allowed in Israel from three days before the election.
He said: "... where Benjamin Netanyahu of Likud has been a very strong frontrunner, the gap between that and the Kadima party has narrowed considerably.
"There was a certain bleeding of support from Likud to the Yisrael Beiteinu party, which has been garnering an incredible amount of support in recent weeks and at the moment looks as though it may get the third-largest amount of seats in this election.
"[This] would give it a strong possibility of being the party to define who actually would govern the country after this election," Hanna said.
"This is the reason there has to be a coalition. No single party will be able to get the 61 plus votes needed to have an absolute majority in the 120-seat Knesset."
Opinion polls indicate Beiteinu is set to win between 18-19 seats, which would make Lieberman a potential "kingmaker" when it comes to forming a ruling coalition government.
Kadima has slowly closed the gap with Likud in recent days and the polls suggest about 20 per cent of Israeli voters are undecided.
"With such high numbers of undecided [voters] you can't really talk about a gap," Eytan Gilboa, a professor of political science at Israel's Bar-Ilan University, told Al Jazeera.
"Tzipi Livni is working hard on the women vote - 60 per cent of the undecided vote is women, I think," he said.
"She's trying to get the undecided to vote. And she's trying to scare people about Netanyahu and Lieberman," he said.
Lieberman's hardline stance has found favour with voters outside of his party's traditional support base of Russian-speaking immigrants.
Israel's assault on Gaza has had a "huge impact" on Israeli society as the election nears, Gil Hoffman, a political analyst and chief correspondent for the Jerusalem Post, said.
"Here at first it looked like the war would be helping out the Likud party. Then it really turned out that it helped the Yisrael Beiteinu party, which is an ultra patriotic party. The atmosphere was very helpful to that party," he said.
"There are certainly many undecided voters, a lot of people are going to be deciding what they are going to do when they get to the polling station tomorrow and that really says something about how unattractive our candidates are."
Livni has distanced herself from promises made by Ehud Olmert, the former Kadima leader, to remove 60,000 West Bank settlers, reflecting the hardening mood in Israel, subsequent to the Gaza conflict.
More than 1,300 Palestinians were killed in Israel's 22-day war on the Palestinian territory. Thirteen Israelis also died.
Kadima has made a last ditch effort to sway undecided younger voters by driving a flat-bed lorry with a built-in DJ stand across Israel.
"We're targeting young Israelis who don't normally go to vote," Avital Sahar, a Kadima party representative and one of the caravan organisers, told Al Jazeera.
"When they were polled, most of them, let's say 70 per cent, said they were choosing between Kadima and another party."
But though it gathered crowds in Acre, Haifa and Netanya, Kadima's so-called "caravan of hope" was unable to complete its journey after being caught in a traffic jam from a road accident, and returned to Tel Aviv for the party's main campaign event.
Indirect talks between Israel and Hamas, mediated by Egypt, are under way in a bid to formalise a ceasefire agreement.
|Speculation has been rife over a deal with Hamas to free Gilad Shalit [EPA]
Recent days have seen increasing talk of a deal with Hamas over Gilad Shalit, the Israeli soldier captured in a cross-border raid by Palestinian fighters in 2006.
Any progress on Shalit's release would probably boost support for Kadima and its coalition partner Labor, led by Ehud Barak, the defence minister.
Barak has been behind the recent speculation about a deal on Shalit after telling reporters "supreme efforts" were being made to secure the captured soldier's release.
But the prime minister's office on Sunday dismissed talk of a deal as "harmful and exaggerated", and while an agreement might be reached before Olmert leaves office - he could stay in the role for up to 42 days until a coalition is formed - it is unlikely to occur before the ballot.
Hamas officials have told Al Jazeera that Shalit's release would not be part of any ceasefire deal.
Israel's elections have also seen a substantial slide in the fortunes of Labor, which polls show is now in fourth place, and expected to receive its worst-ever electoral defeat.
Several figures are tipped as potentials to succeed Barak as Labor's leader in the aftermath of the elections.
Isaac Herzog, the welfare and social services minister; Ophir Paz-Penis, a Knesset member and former minister; and Avishay Braverman, an economist and Knesset member, are all said to be in the running.
"Labor isn't finished. They will have less numbers in the Knesset this time, but the hardcore of Labor is still there and I think they're now grooming new leadership,” Gilboa told Al Jazeera.
"Even if they don’t do well this time, next time they will regain substantial power."
Once the election results are in, Shimon Peres, Israel's president, will ask the head of the party with the most votes to form a government within 28 days, a period which the president could extended by up to 14 days.
To achieve a majority, a party or coalition must hold more than 60 of the Knesset's 120 seats.