NEVE ILAN, Israel – Kadima, an upstart party formed only months ago, scored an unprecedented victory in Israel’s election last night. But it won fewer votes than polls had predicted, complicating the task of coalition-building for Prime Minister-Elect Olmert.

Israeli voters rejected Likud, the party of the right-wing, and its leader, Benjamin Netanyahu, while bringing back to the center of the political stage Labor, defined by its head, Amir Peretz, as a “social democratic party.” Voters also empowered several niche parties that are lobbying for narrow interests that have little to do with Israel’s external and security challenges, including one headed by an ally of Cuba’s communist dictator, Fidel Castro.

The Kadima Party was formed in late December by Prime Minister Sharon, who remains in a coma after suffering a heart attack. An Israeli Radio reporter who visited Mr. Sharon’s bedside reported him to be “looking rested like a man after a long and arduous journey.”

After admitting defeat yesterday, Mr. Netanyahu, whose party won only 10 seats in the Knesset, cited the breaking up of the party by Mr. Sharon as the main reason for his party’s poor performance. In what was dubbed as an Israeli political “big bang,” Mr. Sharon took with him to Kadima some of Israel’s most talented politicians, including Mr. Olmert, who were disappointed by the veering of Labor to the left.

“A historic chapter is over” was how Mr. Olmert described the new era of Israel politics that has just begun, when he addressed his somewhat disappointed supporters at the party’s Neve Ilan headquarters. It is up to Mr. Olmert now to lead the drive for unilateral disengagement from the territories that Mr. Sharon began.

But prior to redrawing Israel’s map, Mr. Olmert will have to deal with a redrawn political map. The number of seats his party won, 29, is far smaller than what was earlier predicted.

The biggest winners last night were niche interest groups, such as a party lobbying for retirees’ rights headed by a former Mossad agent, 79-year-old Rafi Eitan. Seen largely as a protest vote against belt-tightening fiscal policies, the Retiree Party won eight Knesset seats, turning it into a necessary linchpin in any coalition government.

But many of its voters, which, according to exit polls, included some young people who sympathized with the plight of retirees whose incomes were cut, were unaware that Mr. Eitan has become wealthy through doing business in Cuba, where profits must be shared with the communist dictator Fidel Castro. Mr. Eitan turned to Cuba after being barred from even visiting America, where he is wanted for his role in the Jonathan Pollard spying scandal.

“I don’t know what their national priorities are,” said one Kadima candidate, Danny Ben-David, who was slated too far down on the party list to become a Knesset legislator. He said he was not aware of Mr. Eitan’s business in Cuba. “I am for the rights of retirees too,” Mr. Ben-David told The New York Sun. “But what do they think about the borders, or education?”

In a victory speech, Mr. Olmert spoke of his personal awakening from “the dream of the entire land of Israel” and went on to call on the president of the Palestinian Authority, Mahmoud Abbas, to negotiate new borders. He did not mention Hamas by name, nor did he mention any conditions he might impose before starting talks with the Palestinian Arabs. Instead he refered to the need for them to “adjust their dreams to realities.”

If the Palestinian Arabs manage to do that soon, “We will sit around the negotiation table to create a new reality in our region,” Mr. Olmert said. “But if they do not, Israel will take its destiny in its own hands.”

With “wide national agreement” and the backing of “our friends around the world, foremost among them the United States of America’s president, George Bush, “Israel will act alone. We will not wait forever,” Mr. Olmert said. “The time has come to act.”

To begin a major drive that would include uprooting some settlements, Mr. Olmert will need to compose a new governing coalition that will almost certainly have to include two Orthodox religious parties whose main interest is in budgets for Jewish institutions they control. Although Shas, which became the third most popular party last night, and Torah Judaism mostly oppose withdrawal from the settlements, their leaders last night expressed enthusiasm about joining up with Mr. Olmert.

Another force Mr. Olmert will have to contend with is Avigdor Lieberman, who heads the Our Israel Party, which has transformed itself from a niche party fighting for the rights of Russians to a major force on the right. “We are open to any offers, but we will not compromise on our principles,” Mr. Lieberman told supporters yesterday in Ashdod, a city with a large Russian-speaking population.

Labor’s Mr. Peretz, the former union leader who is expected to be the first politician Mr. Olmert calls once coalition negotiations begin, has mostly run on a social and welfare platform. “The social revolution is alive, breathing, and bubbling,” he told enthusiastic crowds in the Hatikva neighborhood of Tel Aviv, a poor neighborhood where he set his party headquarters.

Mr. Peretz’s message about the widening gap between rich and poor in Israel, after Mr. Netanyahu’s major drive to cut government deficits, struck a chord among Israeli voters, and other parties quickly joined in. Many say they believe that yesterday’s unprecedented success of Mr. Eitan’s party was the result of the way Mr. Peretz stressed the social agenda.

Likud, the party that in Israel’s last election, in 2003, captured the largest number of seats in the 120-member Knesset, crashed last night. Although its leader, Benjamin Netanyahu, vowed to continue to lead the party, it was clear last night that Likud’s traditional claim of being the vanguard of the country’s right wing was relinquished, and that the camp espousing settlements a free market would need to regroup before it recovers, if it is to survive at all as a major political force.