At the moment the coalition government holds just 61 seats in the Knesset.
Mr Netanyahu and his party will face challenges from a revived Labour Party, led by Shelly Yachimovch, a Shaul Mofaz led Kadima and the newly formed Yesh Atid, a centrist faction founded by former journalist Yair Lapid.
Recent polls suggest that Likud are the frontrunners.
Defence Minister Ehud Barak said this week that the early elections would have no bearing on Israel's path over a nuclear-armed Iran.
He said: "The election would have no effect on considerations on the professional level regarding the Iranian issue."