In the exit poll of private television channel RTL, the Christian Democrats garnered 38 of the 150 seats in parliament against 34 for their main rival Labour Party.
In a competing exit poll, NOS public television also predicted a Christian Democrat lead with 43 seats against 35 for Labour.
The Dutch electoral council said voter turnout was 78 percent, down two percent for the 2003 elections.
According to the latest figures in the exit polls, it would be difficult to revive the current centre-right coalition, while a Labour-led left-wing grouping will also have trouble securing a majority.
A possible election result could be a sort of "grand coalition" of the Christian Democrats and Labour, not unusual in Dutch politics since 1945.
Balkenende, 50, with a safe Calvinist middle-class image and a look that has earned him the nickname Harry Potter, was initially unpopular because of his austerity measures but the reforms he pushed through are now credited with bringing about an economic turnaround.
The far-left Socialist Party made major inroads according to the polls with 30 in the RTL poll and 23 at NOS, up from nine seats currently.
The Socialist Party campaigned against social welfare reform and attracted a significant protest vote not only against the centre-right government's socio-economic reforms, but also from traditional Labour supporters who felt their party has sailed too close to the Christian Democrats in anticipation of a possible coalition.
The Christian Democrats current coalition partner, the right-wing liberal VVD known for its hard-line Immigration Minister Rita Verdonk, garnered only 20 places in the RLT poll and 21 according to the NOS.
While the Netherlands has been splashed across front pages around the world for its tough stance on immigration and integration, the election campaign was
mainly fought over social welfare and economic issues.
Even the government's proposed "burqa ban" and allegations of torture by Dutch troops in Iraq that made headlines last week appeared to have had little impact.
Since the 2002 rise of populist leader Pim Fortuyn -- murdered by an animal rights activist who said he wanted to protect weaker members of society such as immigrants and Muslims -- and the killing of filmmaker Theo van Gogh by a Muslim radical in 2004, the perceived lack of integration by Muslims who account for 5.8 percent of the population has been debated here.
However, Dutch voters seem to have tired of the issue and the major parties appear to have reached a consensus on hard-line policies to curb immigration and promote integration, making it almost a non-issue in the campaign.
Of the right-wing populist parties the Freedom Party of outspoken Islam critic Geert Wilders, a former VVD MP, came out of nowhere to win between six and eight seats according to the exit polls.
With two dozen parties to choose from and a proportional representation system, the results of the Dutch general elections will likely herald the start of protracted negotiations to form a government usually led by the leader of the party that garnered the most seats.
Copyright AFP (Agence France-Presse), 2006
