The Elections Committee said in a statement that the decision was taken after "a careful checking" of the possible misconducts, reports Xinhua news agency.
The right-wing ruling party was however, still lagging behind the centrist Blue and White, led by former Defence Minister Benny Gantz, which won 33 seats.
The Arab-Jewish Joint List party won 13 seats, becoming the third-largest party in the Knesset (Parliament).
"Israel Our Home", the party of Avigdor Lieberman, the emerging kingmaker of the recent elections, won eight seats. Lieberman has called for a "broad, liberal unity government" with the religious parties.
Shas, a Jewish ultra-Orthodox party, won nine seats, while another ultra-Orthodox party, United Torah Judaism, won seven seats.
Yemina, a coalition of pro-settler parties and Netanyahu's close allies, won only seven seats.
The Labor party won six seats and the Democratic Union, a coalition of left-wing parties that includes former Prime Minister Ehud Barak, won five seats.
In the election, which were held after the polls in April failed to form a government, none of the parties gained enough votes to form a majority government in the 120-seat Parliament, creating a political paralysis.
In an attempt to break the deadlock, President Reuven Rivlin called Netanyahu and Gantz for a meeting and reach an agreement to form a unity government.
The two leaders were expected to meet for the second time on Wednesday at the President's House in Jerusalem.
Officials with both parties said no breakthrough in the negotiations has been achieved.
Netanyahu, who has been in office since 2009, has refused to step down, calling for a broad unity government under his leadership.
Leaders of Blue and White party have repeatedly said during their election campaign that they will not join a government under Netanyahu's leadership as long as he has corruption cases against him.
Netanyahu is a suspect in at least three separate criminal cases of bribes, fraud and breach of trust.
Attorney-General Avichai Mandelblit already said he intends to charge Netanyahu, pending a hearing that is expected to take place in two weeks.
( With inputs from IANS )