Angela Merkel is set for a fourth term as Germany’s chancellor, according to exit polls.
However, the poll suggests the anti-immigration Alternative for Germany (AfD) party will enter the national parliament for the first time.
Mrs Merkel’s conservative party took between 32.5 and 33.5%, well ahead of the second placed Social Democratic Party with 20-21% which would be its worst result since World War Two.
But in a major shock, the AfD took 13 to 13.5% support in Sunday’s vote making it the country’s third biggest political force.
It is now heading for the opposition benches of the Bundestag lower house – the first time a hard-right openly anti-immigration party with so many seats has entered parliament since World War Two.
The four-year-old party has links to the far-right French National Front and Britain’s UKIP.
Supporters of AfD cheered as the exit poll results were announced and co-leader Alexander Gauland vowed they would “change this country.”
In her victory speech, Mrs Merkel vowed to win back voters from the AfD and admitted the party’s entry into parliament poses “a big challenge”.
Another three parties cleared the 5% hurdle to representations, including the liberal Free Democrats who secured 10%, anti-capitalist Left and ecologist Greens who both achieved about 9%.
Mrs Merkel failed to secure a ruling majority and now the process of coalition building will begin and could take several months.
SPD deputy leader Manuela Schwesig said her party would now go into opposition which rules out a re-run of Merkel’s existing alliance with the party.
An alternative coalition for Mrs Merkel would be a three-way tie-up with the liberal Free Democrats (FDP) and the ecologist Greens.
Mrs Merkel, 63, faces four years of government in a fragmented parliament after the return of the FDP – unrepresented at national level for the last four years – and the arrival of the AfD.
Founded in 2013 by an anti-euro group of academics, the AfD has developed into an anti-immigration party that exploited Mrs Merkel’s 2015 decision to leave German borders open to over one million migrants mainly from the war-ravaged Middle East.
Social Democratic Party leader Martin Schulz said the election was a “bitter day” for the party and added: “Especially depressing for all of us is the strength of the AfD, which for the first time brings a right-wing party into German parliament in such a strong position. This is a turning point.
“The fact that we took in more than 1 million refugees in our country is still dividing in our country.
“What for some has been an act of humanity and charity is to others menacing, strange and filled with fear. We did not manage to persuade all of our voters that Germany is strong enough not to leave anyone behind.”