In in end the heads of the coalition parties couldn't agree and chose to dissolve Parliament, issuing a statement saying it was done "out of national and budgetary responsibility".
The move comes after the ruling coalition appeared to come up short on votes needed to pass a contentious piece of court-ordered legislation.
Mr Netanyahu, who has been in office since 2009, said the decision was a "unanimous" one and the poll will be held in April.
"The current coalition is, in my eyes, the core of the next coalition", Netanyahu said.
Prime Minister Benjamin Netanyahu had called the coalition meeting in an unsuccessful effort to save his coalition by finding an agreement on a haredi, or ultra-Orthodox, draft bill.
"Accused of fraud in investigations carried out in Israel, Benjamin Netanyahu is trying to manipulate the global community", Turkey's ruling Justice and Development (AK) Party spokesman Omer Celik also said in a tweet.
Netanyahu's coalition has been roiled by internal divisions for months.
The Hareidi Draft Law, as it is called would impose financial sanctions on religious learning institutions which failed to meet enlistment quotas, while simultaneously enabling those who have already selected to defer their military to service to extend their deferments.
The razor-thin majority has made it hard for the Israeli leader to legislate, this becoming evident after his coalition failed to pass a controversial bill that called for ultra-Orthodox Jews to serve in the military. But years of exemptions have generated widespread resentment among the rest of Jewish Israelis.
Yair Lapid, leader of the opposition Yesh Atid party, announced earlier on Monday that he was withdrawing his support for the bill.
"Obviously Netanyahu has realised this is a serious threat and the last thing he needs in the midst of an election campaign is the attorney-general deciding to prosecute him", said Reuven Hazan, a Hebrew University political scientist.
Another victory for Mr Netanyahu would assure his place in history as Israel's longest-serving leader and allow him to solidify his close alliance with US President Donald Trump.
With the opposition parties now splintered, the only thing that seems to stand in his way is potential criminal charges over corruption allegations.
Netanyahu, facing the possibility of bribery and breach of trust charges in three different cases, made scant mention of these investigations at a gathering of his Likud Party as he announced plans for what is expected to be an April 9 vote.
The country has always been eagerly awaiting the attorney general's decision on whether to press charges.
Mr Netanyahu has denied all of the allegations against him, claiming they are part of a media-driven witch hunt.
Under law, a fresh election has to be held by November 2019. But since Lieberman's resignation the coalition has been relying on the slimmest of parliamentary majorities, just 61 out of its 120 members, and has found governing hard. Rarely do governments last an entire term, due to Israel's complex parliamentary system.