JERUSALEM - Prime Minister Ariel Sharon's right-wing Likud Party dominated Israel's national elections yesterday, winning by far the largest number of seats in parliament and giving Sharon the chance to form a new government that could carry out his tough military policies against the Palestinians.

Likud won 37 seats in the 120-member parliament, a gain of 18, according to election officials and exit polls, a result that promised to make the political right the dominant power.

The big loser was the Israeli left. The center-left Labor Party, led by Amram Mitzna, captured about 20 seats, a loss of at least six, the worst showing in the party's history. The pro-peace Meretz Party won only six seats, four fewer than in the last election, and the party's leader, Yossi Sarid, responded by resigning last night.

A new political force emerged, the centrist, determinedly secular Shinui Party, whose campaign centered on opposition to government subsidies for ultra-Orthodox institutions. Preliminary returns showed Shinui winning about 15 seats, more than double its previous number, and making it the third-largest party. It pushed down to fourth place the religious Shas Party.

Sharon, appearing at a Likud celebration in Tel Aviv, acknowledged that Israel's economic woes and the conflict with Palestinians had yet to be solved.

"The battle against the terror organizations has not ended, and it is claiming victims every day," he said. "The Iraqi threat hangs over our heads, and the economic crisis still threatens the stability of our economy and the chance for every Israeli citizen to prosper."

Sharon said he had ruled out forming a governing coalition with only right-wing parties, indicating he would try to entice Labor or Shinui, or both, into a new government. If he could not find willing partners from the center, he said, he would call for another election.

Sharon said voters endorsed the idea that he could "bring Israel victory over terrorism" and provide "a real opening for peace. ... It is possible. It depends only on us. And with the help of God, this is how it will be. Then and only then will the time of celebration be upon us."

Mitzna, the Labor leader, said last night that he remained opposed to rejoining Likud in a national unity government, though surveys have found a majority of Israeli voters favor that course. Shinui's leader, Tommy Lapid, has pledged not to join a government with the ultra-Orthodox.

No single party has won an outright majority of seats in parliament in Israel's 55-year history, and the making of a coalition often requires weeks of negotiations among factions demanding Cabinet seats, financial commitments and changes in the prime minister's policies.

Sharon calls for unity

"I say to all the parties, the differences between us are dwarfed by the murderous hatred of the terror organizations," Sharon said. "We must not leave Israel disjointed inside, eaten up by needless hatred. Not at a time of war, not a time of crisis, not now. Israel needs unity. Israel needs stability. Israel needs both quickly, before the crisis deepens further."

Mitzna vowed to keep Labor out of the government. "People have chosen Sharon to be the prime minister, but at the same time they have chosen us to be the alternative," he told a somber crowd at Labor Party headquarters in Tel Aviv. "There is no shame to be in the opposition, and I promise you that [Likud's] time will be short."

"Sharon wants us to be the fig leaf for his failing policies," Mitzna said. "We are not interested to join him, but to replace him." He then urged followers to remain united, alluding to internal party discord and calls that he be replaced as leader.

"I will lead the Labor Party in the fight for the future of the country," Mitzna said. "I promise you that we will see better days together. We are one united camp. A camp of home and a camp of peace."

Likud's victory amounted to a endorsement of Sharon's tough military policies against the Palestinian Authority led by Yasser Arafat, and it seemed to doom any attempt to restart peace negotiations as long as Arafat retained power.

Voters shunned Labor's proposal to return immediately to negotiations and begin withdrawing from Palestinian territories even if violence continued.

Palestinian officials expressed disappointment at Sharon's victory, warning that it would lead to more violence.

"This is a heavy blow to a peaceful settlement," said Yasser Abed Rabbo, the Palestinian Authority's minister of information. "Israelis have committed a historical mistake which they and the Palestinians will regret."

Sharon's victory was unusual because the prime minister, 74, promised no changes in the policies in what has become a war of attrition against the Palestinians, a conflict in which the only developments from week to week are the names of the dead and injured on both sides. In many ways, it was an election that few people wanted, one triggered by Labor's withdrawal from a unity government in October.

Only about 70 percent of the eligible voters went to the polls, the lowest turnout in the country's history. In another sign of either voter apathy or of the strained economy, one of the national television stations interrupted coverage of the election to broadcast a lottery drawing.

"From a certain stage on, it does not matter who the captain of the Titanic is," said Roy Politi, 34, a lawyer from Jerusalem who did not cast a ballot yesterday. "It's the stage where you hit the iceberg and begin to sink, and we are already there."

Not even a tattered economy or allegations of corruption stripped Sharon of his popularity - nor could his failure to deliver on promises to secure a lasting peace.

"Foreigners who come here for a visit wonder how it can be that after two such bitter years the people prefer Sharon," political commentator Nahum Barnea wrote in Yedioth Ahronith. "The answer to that is the question itself: When the situation is difficult, people stick to what they have."

Previous campaigns, Barnea wrote, "were characterized by an abundance of far-reaching promises that could never be met. This time the candidates knew that they were addressing a sober public with no illusions. Sharon did not promise peace and Mitzna did not promise a new Middle East."

While Mitzna tried to convince people that a new strategy was needed to end the Palestinian uprising, voters apparently decided that negotiations were part of a strategy that had already been tried and had failed.

People who did vote said they did so more out of a sense of civic duty than a belief that their ballot might lead to a better life.

Don't make it worse

"The situation we are in is very difficult," said David Shoresh, a 23-year-old law student at Hebrew University, after he voted at an elementary school in Jerusalem's French Hill neighborhood. "I think we all are trying to choose someone who doesn't make the situation worse than it is."

Yesterday's elections were held under extraordinary security, with 30,000 police patrolling polling places and roadblocks along the border with the West Bank.

Israel's army imposed a travel ban and curfew throughout the West Bank, prohibited Palestinians from entering Israel to work and barred the transport even of food between cities.

Those measures, scheduled to last until tonight, were intended to prevent attacks by militant groups. Palestinian gunmen killed six Israelis at a polling station in Israel's north during Likud's primary Nov. 28.

Nine Palestinians were killed yesterday, including four in a firefight with Israeli soldiers in the West Bank and two who the army said tried to infiltrate a Jewish settlement in the Gaza Strip. Three died in an explosion that Palestinians blamed on an Israeli missile strike and Israelis attributed to a bomb that blew up during assembly inside a house.