Netanyahu's Likud party returned 30 seats in the Knesset to the Zionist Union's 24 — and is now likely to form the next coalition government with partners on the right and the centre.
But on the eve of the polls, the Likud leader made controversial remarks about the high turnout among Israeli-Arab voters, warning that they were being bussed to the polls "in droves".
Obama, who has not yet called Netanyahu to congratulate him following his success, according to Guardian, condemned the incendiary remarks — saying that they sought to "marginalize Arab-Israeli citizens".
READ ALSO: Netanyahu claims victory in Israel election after hard right shift
The US president's response came after the Israeli PM appeared in a video posted to his Facebook page where he urged his supporters to go out and vote, saying: "The right-wing government is in danger. Arab voters are heading to the polling stations in droves. Left-wing NGOs are bringing them in buses."
He also ruled out the creation of an independent Palestinian state and vowed to strengthen construction of settlements in occupied east Jerusalem.
"I think that anyone who moves to establish a Palestinian state and evacuate territory gives territory away to radical Islamist attacks against Israel," he said in a pre-election interview with a website owned by his biggest backer — US casino magnate Sheldon Adelson.
READ ALSO: Netanyahu says no Palestinian state if re-elected
In response, the White House said that it was now preparing to "re-evaluate" its policy on the Middle East process.
A statement issued by the president's press secretary, Josh Earnest, reiterated his hopes for a two-state solution in the Middle East.
"The United States and this administration is deeply concerned about rhetoric that seeks to marginalize Arab Israeli citizens," Earnest said.
"It undermines the values and democratic ideals that have been important to our democracy and an important part of what binds the United States and Israel together."
He added: "Rhetoric that seeks to marginalize one segment of their population is deeply concerning, it is divisive, and I can tell you that these are views the administration intends to communicate directly to the Israelis."
READ ALSO: US-Israel spat intensifies over Netanyahu speech
Earnest said the president would call Netanyahu "in the coming days", insisting that the move was not a rebuke. He said that in two previous Israeli elections, Obama did not call Netanyahu until he was directed by the Israeli president to form a government.
It comes as the US excluded Iran and Lebanese militant group Hezbollah from its terror threat list in an annual security assessment.
The unclassified report, which was presented to the US Senate by director of US National Intelligence James Clapper in February, named Iran as a "cyber and regional threat" to the US because of its support for Syrian president Bashar al-Assad, but did not include the country in the "terrorism" section, as in previous years.
It was published by The Times of Israel, which said it had described Tehran's assistance in preventing Isis from gaining "large swaths of additional territory" in Iraq.
The report also referenced the threat to Hezbollah from Sunni extremists trying to establish networks in Lebanon — saying that they have "increased attacks against Lebanese army and Hizballah positions along the Lebanese-Syrian border" — but did not label the militant group as a terrorist organization.
Hezbollah has previously been accused of responsibility for a number of terror attacks against US or its allies, including the 1983 bombings of the US embassy and American military barracks in Beirut.
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