The coalition blocs that each party leads were neck-and-neck with each other, leaving the ultimate result in doubt and raising the possibility the center-right group might seek to seize power with support from the Sweden Democrats.
Jimmie Åkesson's eurosceptic, anti-mass migration party is forecast to take 19.2 percent of the vote in an exit poll for public broadcaster STV, while the ruling Prime Minister Stefan Löfven's ruling Social Democrats losing significant ground and their Green Party partners only just breaking the 4 percent parliamentary threshold.
The Sweden Democrats, who want the country to leave the European Union and put a freeze on immigration, have about 17 per cent, up from the 13 per cent they scored in the 2014 vote, opinion polls suggest.
This significantly reduces the probability the centre-right Alliance coalition will secure a Parliamentary majority via an official or unofficial deal with the Sweden Democrats.
Sweden's anti-immigrant far-right made gains in legislative elections Sunday and vowed to exert "real influence" as kingmaker, after both the left-wing and center-right blocs failed to obtain a majority and the make-up of the next government remained up in the air.
The potentially promising prospects of the far-right Sweden Democrats had many other Swedes anxious about an erosion of the humanitarian values that have always been a foundation of the Scandinavian country's identity.
Ahead of the election, Prime Minister Stefan Lofven had warned, "The haters are mobilizing in Sweden and are egging on people against people".
A far-right party which campaigned with an anti-migrant message is thought to have taken around one in five votes in Sweden's elections.
"This government has run its course", Kristersson told a party rally, referring to Lofven's minority cabinet. Far-right candidates and parties have seen their stock rise in Italy, Poland, Germany and elsewhere in the past year.More news: Spain gives England first competitive home loss in 11 years
The election had been watched closely for signs about the extent to which a cascade of anti-immigrant fear could hit even Sweden, which has always been one of Europe's most open nations toward refugees.
"Sweden needs breathing space, we need tight responsible immigration policies".
Around 18.5 percent of Sweden's population of 10 million was born overseas, according to Statistics Sweden.
The Sweden Democrats are bidding to become the biggest populist party in the Nordic region, topping the Danish People's Party, which gained 21 percent in 2015, and trump the 12.6 percent for the far-right Alternative for Germany, which swept into the Bundestag past year.
But the two blocs have never governed in tandem, and so far all other parties have shunned the Sweden Democrats.
"I'm afraid we're becoming a society that is more hostile to foreigners".
"I think we are facing an extremely complicated process to form a government, maybe the most complicated in modern times", said political scientist Niklas Bohlin at the Mid Sweden University.
Sabina Macri, voting in central Stockholm, said the current political situation has left her questioning her future in Sweden.
"We will gain huge influence over what happens in Sweden during the coming weeks, months and years", Akesson told party colleagues.