By Jeffrey Heller

JERUSALEM, April 10 (Reuters) - Both Prime Minister Benjamin Netanyahu and his main challenger Benny Gantz claimed victory in Israel's election but exit polls and early results indicated on Wednesday the veteran right-wing leader was on course for a record fifth term.

Updated exit polls on two of Israel's three main TV channels a few hours after voting ended on Tuesday showed Netanyahu's Likud winning more parliamentary seats than Gantz's centrist Blue and White Party. A third survey put Blue and White a seat ahead of Likud.

Though neither party captured a ruling majority in the 120-member Knesset, according to the polls, the surveys put Netanyahu in a stronger position to form a coalition government with right-wing factions, key to an ultimate victory.

Netanyahu's prospects of becoming Israel's longest-serving prime minister appeared to improve as the night went on. Partial results with 40 percent of votes counted gave Likud 40 seats, 10 more than in the previous election in 2015, and Blue and White 35, according to Kan public television and the Ynet news site.

"It is a night of colossal victory," the 69-year-old Netanyahu told cheering supporters in a late-night speech at Likud headquarters, while cautioning that a "long night and possibly day" lay ahead awaiting official results.

Fireworks flared behind him as his wife Sara applauded and kissed him. "He's a magician," the crowd chanted.

Netanyahu said he had already begun talks with prospective coalition allies.

Netanyahu, in power consecutively since 2009, has been fighting for his political survival. The closely contested race was widely seen in Israel as a referendum on his character and record in the face of corruption allegations.

He faces possible indictment in three graft cases, and has denied wrongdoing in all three.

Rival Gantz, 59, earlier also claimed victory, citing preliminary exit polls that showed his party had won more seats than Likud.

"We are the victors," said Gantz, a former military chief fighting his first election. "We want to thank Benjamin Netanyahu for his service to the nation."

Political analysts cautioned it was too early to be certain of the outcome, with many hours to go before a final tally is in. Plus, Israeli exit polls have been wrong in the past.

Ofer Zalzberg, senior analyst with the International Crisis Group, said Likud and Blue and White would have to learn the fate of smaller parties to know whether they had garnered enough support for a coalition.

"Netanyahu is more likely to establish another right-wing government, but we will have to wait and see," he said.