Isaac Herzog said his Zionist Union, which finished second in Tuesday's vote, would sit in the opposition as a counterweight to the nationalist right-wing governing coalition that Netanyahu is poised to form.
The vote, Herzog told Israeli Army Radio, showed that "the nation wants an extreme right-wing government."
"We will challenge it," he added, referring to his role in the opposition.
The resounding victory by Netanyahu's right-wing Likud Party was a stunning turnaround after a tight race that had put his lengthy rule in jeopardy. The latest tally from Tuesday's vote shows the Zionist Union got 24 seats, compared to Likud's 30.
Also Read
"What Netanyahu did recently touched on racism," Herzog said of the prime minister's remarks. It "destroyed a deep relationship with our allies in the world. The American reaction is not at all easy."
Herzog also accused Netanyahu of running a campaign based on "lies, fear-mongering, hostility" and said the premier's earlier claim that foreign governments were working to oust him was a "complete lie."