Chancellor Angela Merkel is set to win her fourth term despite but will have to govern with a far less stable coalition in a fractured parliament after her Christian Democratic Union, CDU, saw its votes slashed by 41 percent from the 2013 election.
According to the ARD/Infratest exit poll Merkel secured 34.5 percent, just ahead of the conservative coalition CDU/CSU on 21.4 percent.
In a statement, Merkel said she would've liked to do better, but nevertheless, the party's strategic objectives were realized and she plans to continue forward to the formation of a new government.
"We need to work now for a just and a free country. That means we need to bring together all of the EU countries to fight against the causes of migration and to fight illegal immigration. It is clear that the topic of security is as much a worry for people as the topic of prosperity," Merkel said, adding that she plans to listen to far-right Alternative for Germany voters' concerns.
The anti-immigrant, far-right AfD that got an entry to the Bundestag, Germany's federal parliament, garnered 13.5 percent of the vote, emerging as the country's third-largest party.
"There's a big new challenge for us, and that is the entry of the AfD in the Bundestag," Merkel said. "We want to win back AfD voters."
Results were bleak for the Social Democratic Party of Germany, which scored a new low of 20 percent, prompting the party's leader Martin Schulz to announce its decision to drop out of the "grand coalition" of the three major parties and instead become the opposition.
The chancellor will now court the pro-business Free Democratic Party, who has 10.5 percent, and the environmentalist Greens, with 9.5 percent, in an effort to form a government.
Merkel has been in office since 2005. Her Christian Democratic Union has held a steady grip on the country for much of the last 70 years.
But since 2013, the CDU and its sister party the Bavarian Christian Social Union, CSU, have been in a coalition with their main rival, the Social Democrats.
Potential Coalition Partners
The AfD, "Alternative for Germany" party are a eurosceptic, right-wing group founded in 2013. Accused of appealing to extremist voters on issues such as immigration, the party has stoked fear in the German people. The party will get seats at the federal level for the first time.
Led by Alice Weidel and Alexander Gauland, just 15 percent of their members are women. Following the influx of refugees in 2015, the party has seen a marked rise in its vote at regional and European elections.
The center-left Social Democratic Party is led by Martin Schulz, the former president of the European Parliament. After an initial surge in the opinion polls, his star fell courtesy of a series of state election defeats.
Founded in the 19th century, the country's oldest political party acted initially as an umbrella organization for a number of leftist movements, trade unionists, and communists before becoming more centrist. Its strong social justice platform has been dented in recent years by its support for market reforms.The SPD's relationship with the CDU has been both its success and its downfall. By becoming so closely aligned with Merkel's first and current governments, critics say its policies have been subsumed and little difference remains.
The liberal Free Democratic Party was a junior coalition member in Merkel's second term. It promotes a free economy and individual liberty. But it has generally remained a junior partner and an occasional king maker.
After failing to get more than 5 percent of the vote in 2013 election, the goal is to get back into the Bundestag under the guidance of Christian Lindner. He is a staunch European but has clashed with Merkel over her migrant policy.
Germany's environmentalist Green party led by Katrin Göring-Eckardt and Cem Özdemir are also seen as potential kingmakers as they have said they are open to working in coalition with the center-right. The party was founded in 1980 with a strictly environmentalist and pacifist platform.
The Greens pushed through a nuclear power phase-out and enacted laws easing immigration and same-sex civil partnerships. They have a leftist agenda on tax and social policy. But there are deep divisions between those who are willing to go into a coalition with the CDU/CSU and the others who believe their policies go against the party's principles.