The leader of the Israeli Labour Party, Amir Peretz, has lost his job, throwing the future of the country's coalition government into doubt.
Amir Peretz was heavily criticised over last year's conflict in Lebanon
Exit polls after a leadership election show Mr Peretz trailing in third place.
The two men who defeated him, former Prime Minister Ehud Barak and a former head of Shin Bet, Ami Ayalon will now face a run-off vote.
Both men have threatened to pull Labour out of the ruling coalition unless Prime Minister Ehud Olmert steps down.
This follows damning criticism of Mr Olmert's leadership in an official report on the handling of the Lebanon war last year.
The BBC's Mike Sergeant in Jerusalem says the Labour leadership race is much too close to call, with exit polls for two Israeli television channels predicting two different results.
A poll for Channel Two said Mr Ayalon was on track to win 39% of the vote, compared to 33% for Mr Barak and 19% for Mr Peretz.
Israel TV said its poll gave Mr Barak 38%, Mr Ayalon 36%, and Mr Peretz 17%.
Mr Ayalon appeared to be ahead in Jerusalem, Tel Aviv and the kibbutzim, while Mr Barak was leading in Dimona, Holon and the Druze village, Beit Jan. Mr Peretz was in the lead in Lod, Bat Yam and Eilat.
Both polls, however, predicted the two men would fail to reach the 40% threshold required to avoid a run-off election on 12 June.
Labour officials said 65.5% of the 103,000 party members voted in the election.
Final results for the election are expected on Tuesday morning.
Mr Barak, who served as prime minister from 1999 to 2001, has been the biggest name in the race.
Ehud Barak (l) and Ami Ayalon (r) are running neck and neck
During his two turbulent years in office, Israeli troops withdrew from Lebanon, peace talks ended in failure and the Palestinian intifada, or uprising, began.
Mr Barak still has many enemies in Israel and within his own party, our correspondent says.
They accuse him of arrogance, and a stubborn refusal to delegate or listen to advice when in office. The former prime minister says he is a changed man.
During the campaign, Mr Barak has shunned the media, instead spending all his time talking direct to party members.
But, according to our correspondent, that direct contact with party members has not given him a clear advantage over Israel's former internal security chief, Mr Ayalon.
A relative political novice, Mr Ayalon has been in parliament for just one year.
But that gives him fresh appeal, our correspondent says, and he has vital experience in the area that matters the most to Israelis - security.