Elections are currently scheduled a year from now. But Israeli coalition governments rarely last their full terms, and Netanyahu appears to have concluded that now is the time to strike.
The immediate reason is the difficulty in passing the annual budget. If a budget isn't approved by Dec. 31, he would be required to order a new vote. In a challenging economic climate, experts say the next budget will require deep cuts to social programs favored by his coalition partners.
But Netanyahu may have deeper motivations as well. After presiding over a remarkably stable coalition for nearly four years, he has little incentive to wait a few extra months when the stars seem so well aligned for him to win re-election.
"Think of a stock: His is high now and he wants to sell before it drops," said veteran political analyst Hanan Crystal. "Bibi has no real challengers. The gold medal has already been decided. Now the fight is over silver," he added, using Netanyahu's nickname.
Opinion polls put Netanyahu's Likud Party far ahead of all rivals, his coalition partners are vulnerable, the opposition is fractured and leaderless, and the only truly viable candidate to replace him, former Prime Minister Ehud Olmert, is entangled in a legal battle that will keep him on the sidelines for the coming months.
In addition, Netanyahu appears to have defused a crisis with the United States over Iran's nuclear program. The U.S., Israel and allies accuse Tehran of trying to develop atomic weapons, but Iran denies the charge, saying its program is for peaceful purposes only.
In a speech to the United Nations last week, Netanyahu backed away from threats to attack Iran, signaling that the world has until next summer to curb Tehran's nuclear program. He had been under heavy U.S. pressure to halt his calls for military threats.
Crystal said re-election would give Netanyahu a valuable vote of confidence in case Obama gets re-elected. Many have speculated that Obama may seek payback for what is perceived as Netanyahu's preference for Obama's Republican challenger Mitt Romney, an old friend and ideological comrade.
Early this week, Netanyahu held out the prospect of elections when his office announced he would meet with coalition partners to discuss the budget. Since then, it has appeared increasingly likely that he will call a vote.
In perhaps the strongest sign that elections are near, Netanyahu has had a high-profile falling out in recent days with his closest ally, Defense Minister Ehud Barak. Netanyahu's office has accused Barak of trying to undermine him in discussions with American officials. Netanyahu was especially upset when Barak met Chicago Mayor Rahm Emmanuel, a close friend of Obama, during a recent trip to the U.S. without telling the prime minister. Barak has said he did nothing wrong, and has presented himself as a moderating force who has repeatedly smoothed over relations with the Americans throughout Netanyahu's tenure.
Barak leads the small, centrist "Independence" Party, one of the few moderate elements in a coalition dominated by nationalist and religious parties. A former prime minister and military chief, Barak is well-respected internationally.
During any campaign, opponents are likely to seize upon Netanyahu's rocky relationship with Obama. The U.S. is Israel's closest and most important ally. Netanyahu could also come under fire for his failure to advance peace talks with the Palestinians, massive street protests last summer against the growing gap between rich and poor, and widespread resentment over attempts by ultra-Orthodox parties to impose their ways on general society. A committee formed by Netanyahu to end a controversial system of draft deferments for ultra-Orthodox men failed in spectacular fashion, breeding even more anger toward religious parties.
Despite these shortcomings, Netanyahu remains popular in opinion polls, thanks to a lengthy period of quiet, a resilient economy and his handling of the Iran issue. He has no serious rivals who could defeat him.
There are plenty of contenders for second fiddle, beginning with the rejuvenated Labor Party and its leader, former journalist Shelly Yachimovich. She is hoping to capitalize on the social protests by focusing on jobs and the economy.
Foreign Minister Avigdor Lieberman hopes his ultranationalist Yisrael Beiteinu party makes gains in the elections.
The decimated Kadima Party is also in the mix, but barely. Currently the largest party in parliament, it is has slipped badly in the polls under new leader Shaul Mofaz.
Then there's the biggest wild card of all: political newcomer Yair Lapid, a former TV anchorman who has launched a new party catering to Israel's silent majority of disgruntled middle class.
According to a survey in the Haaretz newspaper last week, if elections were held now, Netanyahu's Likud Party would win 28 seats in the 120-member parliament, putting him far ahead of any other party.
Netanyahu is also deemed most suitable to be prime minister with 35 percent support. Yachimovich lagged far behind at 16 percent.
In order to be prime minister, Netanyahu would then have to put together a coalition with 61 members.
According to the poll, Netanyahu could form another government with the Jewish religious and nationalist parties currently in his coalition. The poll indicated that dovish and Arab parties now in the opposition would likely remain a minority. The poll surveyed 507 people and had a margin of error of 4.2 percentage points.