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Israel's Knesset voted to dissolve in a preliminary reading of a bill expected to be finalised next week, after which centrist Foreign Minister Yair Lapid will become interim prime minister.
A high-level probe is taking place into an NSO database following allegations that police used the Israeli spyware Pegasus without judges' permission against public figures.
Nearly 14,000 polling stations opened at 7am (5am GMT) across the country, several thousand more than previous elections to prevent crowding in the pandemic, Israeli media reported.
Allegations in Israeli media centre on the Pegasus malware made by the Israeli firm NSO, which can turn a phone into a pocket spying device, has caused a domestic spat.
Israel's caretaker Prime Minister Yair Lapid held his first cabinet meeting on Sunday since taking over as leader from his predecessor Naftali Bennett.
Israel's President Reuven Rivlin said Monday he will pick a candidate to form the next government by April 7, following a tightly fought general election.
In-depth: In Sheikh Jarrah, where Palestinians resist forced evictions, one man is at the centre of the tensions. °®Âþµº takes a deeper look at Itamar Ben-Gvir, the far-right politician adding fuel to the fire.
Thousands of anti-Netanyahu protesters on Saturday flocked to the prime minister's residence to celebrate the end of his time in office.
The Israeli president has criticised the unity government of in-fighting ahead of the elections.
The preliminary vote makes more likely the possibility of another election to take place in March next year.