Preliminary results in the German election show the centre-left social democrats have beaten outgoing chancellor Angela Merkel's centre-right bloc.
SPD won 25.8% to the CDU/CSU's 24.1%, according to figures from German broadcaster ARD and Reuters.
The greens were next with 14.6%, followed by the FDP on 11.5%.
The two parties have signalled they are willing to discuss a three-way alliance with either of their bigger rivals to form a majority 50% government.
Right-wing populist party AfD came fifth with 10.4%.
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Hoping to become the next chancellor is CDU/CSU bloc's Armin Laschet and the frontrunner, outgoing finance minister Olaf Scholz for the Social Democrats.
The greens, with candidate Annalena Baerbock, are also making their first run for the chancellery.
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Germany could now face months of talks over a coalition, meaning Mrs Merkel stays on in a caretaker role.
Mr Laschet, governor of North Rhine-Westphalia state, said his party's loss of votes "isn't pretty" and conceded that the country would now probably end up with a three-way coalition.
Mr Sholz, outgoing vice chancellor and finance minister, said the result was "a very clear mandate to ensure now that we put together a good, pragmatic government for Germany".
Speaking after exit polls, CDU general secretary Paul Ziemiak acknowledged the party had seen "bitter losses" compared with the previous election - where it gained 32.9% of the vote.
He suggested it would be a "long election evening" but hinted at the possibility of working alongside the Greens and Free Democrats.
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Germany's election: What's at stake?
Voting closed at 5pm UK time in a bitterly fought election to replace the country's leader, who's been in power for 16 years.
About 60.4 million people were eligible to elect the new Bundestag - Germany's parliament - which will then choose the new chancellor.
But they had hoped for better, especially after a rally in the polls in the final leg of this contest. They were gathering from early evening in bar R 23 buying drinks hoping to have something to celebrate.
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CDU leader Laschet 'not happy' with Germany exit polls
As exit polls and official projections predicted a tie between them and rivals, the SPD, there was a palpable sense of deflation.
Sandra Khalatbari, candidate for the Berlin parliament told Sky News they weren't the figures she'd hoped for.
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"It is disappointing," she said.
"In the last one-and-a-half weeks we were raising our votes and we were very hopeful that it's going to be successful but now it is kind of disappointing."
Image:Sandra Khalatbari called the figures 'disappointing'
The right of centre CDU, Merkel's party, should have done better. Its chancellor has completed 16 years in power and is one of the most popular politicians in German history. Yet her party has not been rewarded by voters.
There was some consolation in the party's recovery from its meltdown early on, but campaigner Martin Feldmann told Sky News, only outright victory is what counts.
"The numbers in the past few weeks were disturbing - now it's about 25%.
"This is okay but only because of the numbers in the past few weeks. What we want is to be number one. At the moment we are not and I'm not happy about this."
As CDU activists took consolation in large servings of German lager, the period of reflection was already beginning. For some, the problem was the candidate or how voters perceived him on the doorstep.
Regional party organiser Christophe Lehmann told Sky News the problem was the candidate.
He said: "We had to drive against the wind."
Image:Cordula Kollotschek says Mr Laschert doesn't have 'charisma'
"Because many people didn't understand why we picked Laschet. Voters were not convinced."
Former member of Berlin parliament Cordula Kollotschek told Sky News, Laschet is not political box office but that wasn't the only problem.
"He has not the charisma, he's not really a star, he is not really good looking in the media - that's really important in a time like now but also I don't think we have the answer especially for young people for things like climate change."
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A look back at Angela Merkel's 16-year career
On the bar television, coverage continued in almost funereal tones. German political coverage is serious and sombre. Most had drifted away from the screen though, to drink outside on a balmy late summer evening, or head off home.
It's a longer game now.
Whoever clinches the biggest share of Bundestag seats, haggling and horse-trading starts to form a coalition and with everything so close - that may take a while.
Exit polls in Germany suggest the two main rivals are closely tied in an election that will determine who will succeed Angela Merkel.
No single party has ever won a total majority in the country's Bundestag (lower house of parliament), meaning politicians will likely be plunged into negotiations in the coming days.
One exit poll shows Mrs Merkel's CDU/CSU bloc and the centre-left Social Democrats (SPD) neck-and-neck with about 25% of the vote.
Image:The Green Party could have its best result yet as Germany looks likely to have its first national government made up of three parties. Pic: AP
It is the CDU/CSU bloc's weakest result in a post-war federal election - with the party's general secretary conceding the early exit polls "hurt".
One poll puts the SPD slightly ahead of its rival on 26% - prompting the party's general secretary to claim it has a mandate to form a ruling coalition.
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The infratest poll for the broadcaster ARD suggested the Greens could be on track to win as much as 15% and the far-right party AfD could garner 11%.
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The predictions signal that Germany could have its first national government made up of three parties.
In the running to become the next chancellor is CDU/CSU bloc's Armin Laschet and outgoing finance minister Olaf Scholz for the Social Democrats.
The environmentalist Greens, with candidate Annalena Baerbock, are also making their first run for the chancellery.
But Germany could face months of talks to form a coalition government after the election - with all three parties expected to need to join forces to clear the 50% seat threshold in the Bundestag.
It would mean Mrs Merkel does not relinquish power immediately and is required to stay on in a caretaker role for months.
Voting closed at 5pm UK time in a bitterly fought election to replace Mrs Merkel after 16 years in power.
About 60.4 million people in the nation of 83 million were eligible to elect the new Bundestag, which will choose the next head of government.
The new chancellor will have to lead the recovery from the COVID-19 pandemic, which Germany so far has weathered relatively well thanks to large rescue programmes that have fuelled fresh debt.
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Germany's election: What's at stake?
Mr Laschet vowed his party would do "everything we can" to form a new government adding that "we can't be satisfied with the result" predicted in the exit polls.
The result "puts Germany, the Union, all democratic parties before big challenges", Mr Laschet said.
Speaking after the exit polls were revealed, he said: "We will do everything we can to form a government under the Union's leadership, because Germany now needs a coalition for the future that modernizes our country.
"It will probably be the first time that we will have a government with three partners."
CDU general secretary, Paul Ziemiak, acknowledged the party had seen "bitter losses" compared with the previous election which saw it gain 32.9% of the vote four years ago.
Image:Christian Democratic Union (CDU) candidate for chancellor Armin Laschet
He suggested it would be a "long election evening" but hinted at the possibility of working alongside the Greens and Free Democrats.
Meanwhile, Social Democrat counterpart, Lars Klingbeil, declared his party "is back" having previously secured just 20.5% in 2017.
Candidate Mr Scholz proclaimed the projected result a "great success".
"Now we will wait for the final election result, but then we will get to work," he told supporters.
Image:It is the CDU/CSU bloc's weakest result in a post-war federal election
Despite what could be their strongest showing ever, Green party general secretary, Michael Kellner, revealed his disappointment at the anticipated results.
"We gained significantly, but I find it difficult to really enjoy it because expectations were clearly higher," he said.
However, the party has been buoyed by projections that Berlin could get its first Green mayor.
The environmentalist group is predicted to claim a 23.5% share - taking the title from the Social Democrats, who have held the post there for two decades.
Three parties have candidates for chancellor, and they’ve all been the focus of intense public interest.
1) Conservatives - Armin Laschet
Outgoing Chancellor Angela Merkel's conservative Christian Democratic Union (CDU) has dominated German politics for decades along with its Bavarian sister party, the Christian Social Union (CSU).
CDU leader Armin Laschet would be Merkel's natural successor, but he has struggled to win over voters, particularly after he was pictured laughing during a visit to a flood-hit town in western Germany in July.
EPACopyright: EPA
2) Social Democrats
The centre-left Social Democratic Party (SPD) has been in coalition with the conservatives and was the front-runner until the CDU/CSU alliance narrowed the lead.
Finance Minister Olaf Scholz is also Merkel’s vice-chancellor and is still favourite to win.
EPACopyright: EPA
3) The Greens
Focusing on climate change and social justice, they briefly led the polls in the spring.
Leader Annalena Baerbock, 40, has not yet had a role in government but her party is likely to be part of the next one.
In a tweet shared this morning, the French President reminded his followers of his pledges, four years ago, for a stronger EU. Sharing his government's manifesto plan for more integration in the Brussels bloc, he wrote: "An initiative for a sovereign, united and democratic Europe. This is what we launched at the Sorbonne four years ago.
"We have come a long way."
The manifesto called for a "real European sovereignty" alongside a project for a united defence and military power for the bloc.
It called for the "creation of the first common military budget for defence, endowed with 8 billion euros" and "a common strategic culture".
Four years after he was elected, Macron is still fighting for the creation of an EU army.
His dream for a European defence strategy has been accelerated by a recent deal signed between the UK, the US and Australia, which left France short of a lucrative contract for the production of submarines.
Paris described the deal as a "stab in the back" after it led to Canberra pulling out of a £30 billion agreement for France to supply conventionally powered diesel-electric vessels.
Macron told Boris Johnson to come up with ideas to repair relations between London and Paris, when the Prime Minister tried to smooth over tensions provoked by the row.
The talks appeared to be a bid by Mr Johnson to calm the tensions that had only been heightened by his use of inflammatory language in response to France recalling ambassadors and postponing high-level meetings.
Mr Macron's office said the Prime Minister had requested the call and "expressed his intention to restore co-operation between France and the United Kingdom", including on the climate crisis, terrorism and the Indo-Pacific region.
The French president told Mr Johnson that "he is awaiting his proposals", the Elysee added in its brief statement.
Downing Street's description of the call was more muted than France's, with No 10 saying the men discussed "a range of issues of mutual interest", including military co-operation through Nato.
"They reaffirmed the importance of the UK-France relationship and agreed to continue working closely together around the world on our shared agenda, through Nato and bilaterally," No 10 said.
They also discussed the "strategic significance of our long-standing co-operation in the Indo-Pacific", with Aukus widely seen as an attempt to counter China's assertiveness.
Buoyed by a positive meeting with US president Joe Biden, Mr Johnson stoked tensions further earlier this week by using "Franglais" to tell Mr Macron he should "prenez un grip" and give him a "break".
It also emerged that Mr Biden and the Prime Minister discussed further deepening the Aukus pact, while maintaining that further allies, including France, would not be able to join.
Mr Johnson raised the possibility of it being extended to include technology, such as cyber and artificial intelligence, and said that he and Mr Biden had been "taken aback" by the angry reaction from Paris.
People familiar with UK Government thinking said the men also spoke about deepening the pact to collaborate on other areas such as principles on open markets, enhancing non-nuclear deterrents and tackling human rights issues.
There had been some thawing of tensions between the US and France after Mr Macron and Mr Biden held a call.
France committed to sending back its ambassador to Washington next week, having ordered his return in response to the Aukus pact.
Scientists say another vent has opened up on Cumbre Vieja, the volcano on the Spanish island of La Palma that has been erupting for a week, exposing tens of thousands of islanders to new dangers.
The airport was shut down on Saturday because of a cloud of ash spewing out of it.
The intensity of the eruption that began on September 19 has increased in recent days, prompting the evacuation of three more villages on the island, part of Spain’s Canary Islands archipelago in the Atlantic Ocean off northwest Africa.
Rivers of lava have been sliding down the mountainside towards the southwestern coast of the island, destroying everything in their path, including hundreds of homes.
Emergency crews pulled back from the volcano Friday as explosions sent molten rock and ash over a wide area.
Nearly 7,000 people have been forced to abandon their homes.
The recent volcanic eruption is the first since 1971 on La Palma, which has a population of 85,000.
