Exit polls have revealed Angela Merkel will remain Chancellor but her victory has been overshadowed by the far-right AfD winning its first seats in the Bundestag.
Mrs Merkel’s Christian Democratic Union (CDU) party gained 32.9 per cent of seats, her coalition Social Democrats Party (SPD) led by former EU leader Martin Schulz, gained 20.2 per cent and the AfD 13.3 per cent.
The AfD is now the third largest party in the Bundestag after it gained 119,000 votes from citizens who had previously not voted, and almost a million from the CDU.
Mrs Merkel was predicted to gain more seats, however, many Germans blame her for allowing hundreds of thousands of migrants into the country two years ago during her open-door policy.
Mr Schulz, in his concession speech, said the immigration policy had led to the “depressing” rise of the AfD, whose leader has made pro-Nazi comments.
Mr Schulz said: “Depressing for us is the strength of the AfD.
“For the first time a right-wing party will be in German parliament. This is difficult, no democrat can just gloss over that.
“It is clear accepting more than one million refugees in our country is still dividing the country.
“Everybody in our society, including us, needs to show respect and humanity.
“It was such an act of humanity back in the day but some people still experience this as threatening.
“We have not managed to convince some traditional voters that Germany is strong enough that we don’t need to forget anybody.”
He added: “The central task is to work for social cohesion in this state. Social democracy is important.”
Mr Schulz’s SPD party has said it no longer wants to be in a coalition with the CDU and wants to be the official opposition to give a viable alternative to the AfD.
Because of this, the only option left for Mrs Merkel is to to form a coalition with the Greens and FDP – called a ‘Jamaican coalition’ due to the three parties’ green, yellow and black colours.
Later this evening there will be a live TV debate where the leaders will decide who will go into a coalition with each other.