Chancellor Angela Merkel's conservative Christian Democrats (CDU) suffered a fresh blow on Sunday slumping to their worst-ever result in Berlin city-state elections after a surge in support for the populist right-wing Alternative for Germany (AfD).
Support for the CDU dropped to 18 per cent following a swing of 5.3 per cent against the party and after tensions unleashed by Germany's refugee crisis resulted in the anti-foreigner AfD scoring 12.2 per cent of the vote, according to poll results from state broadcaster ZDF.
Berlin's governing mayor Michael Mueller and his left-leaning Social Democrats (SPD) claimed victory in the election after scoring 22.9 per cent of the vote.
"We have reached our goal," Mueller told cheering supporters. "We have a mandate to form a government."
However, the SPD suffered a swing of 5.4 per cent since the last election in the nation's biggest city in 2011 after a large chunk of its supporters swapped over to the AfD.
Sunday's election outcome also means the SPD-CDU coalition that has ruled Berlin no longer has a parliamentary majority.
As a result Mueller is expected to dump the CDU as the junior member of his coalition and instead form a new three-party alliance with the environmentalist Greens and the hard-left Die Linke.
The CDU has emerged as the major loser of all the state elections that have been held this year.
Merkel's party was beaten into third place behind the AfD two weeks ago in a poll in the eastern German state of Mecklenburg-Vorpommern in the wake of a voter backlash against the chancellor's liberal refugee policy.
"We cannot be satisfied (with the result)," said a national CDU parliamentary leader Michael Grosse-Broemer after the party suffered a 5.3-per cent swing in Berlin with the AfD also stealing votes from the party.
Founded just three years ago, the AfD has now gained a foothold in 10 of Germany's 16 state parliaments helping to provide it with momentum ahead of next year’s national elections.
"The real winner is the AfD", declared George Pazderski, who headed up the party's campaign in Sunday's election.
The AfD's joint national leader Joerg Meuthen predicted that the party will enter the German Parliament at next September's federal elections with a double-digit percentage vote.
Still, the AfD vote fell short of the up to 15 per cent which had been predicted in some polls ahead of Sunday's election.
The poll also marked a success for the Die Linke, which increased its vote from 11.7 per cent in 2011 to 15.9 per cent on Sunday after a swing of 4 per cent to the party.
A total of 927 candidates from 21 parties stood in Sunday’s election in Berlin.