With all precincts in York and Adams counties reporting, Tallman garnered 3,363 votes to Rishel's 2,766 votes. Tallman will face Democratic challenger Neil Clifford of Reading Township in the fall.
"We're not going to make it," Rishel said Tuesday night. "It's disappointing like always."
Rishel said he did well in Hanover and Penn Townships in York County, which he attributed to people in the community knowing him. He served as a Penn Township commissioner for 16 years.
But Rishel said he didn't do well in Adams County. Tallman could not be reached for comment Tuesday evening.
Whoever wins in the fall will fill the seat being vacated by state Rep. Steve Nickol, who announced in November that he would not seek a 10th term. Nickol said it was time to look for another career outside the state House.
Tallman had unsuccessfully challenged Nickol in the 2004 Republican primary.
When Nickol decided to step down, Tallman said he saw it as an opportunity to run again.
Rishel has said Nickol suggested to him that he run for office, and he was open to the idea.
Rishel, 57, of Hanover, and Tallman, 61, of New Oxford, each cited experience in running a business as a potential asset in the statehouse.
Rishel and his wife run the American Seed Company, which they founded in 1991. Tallman, who is also self-employed, does computer networking and machine control.
Rishel said he wanted to work on reforming the state's school funding system, which isn't based on actual student enrollment and tends to penalize growing school districts such as those in York County. In doing so, he proposed to relieve property taxes.
Tallman also considered property tax reform to be a priority. He wants to remove it as the primary source of income for local governments.
How the district voted
With 26 of 26 precincts, or 100%
Will Tallman - 3,363 - 55 percent
Mike Rishel - 2,766 - 45 percent
How the county voted
With 9 of 9 precincts or 100%
Will TALLMAN - 879 - 34.84%
Mike RISHEL - 1,644 - 65.16%