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The influx of 163,000 asylum-seekers in Sweden in 2015 has polarized voters and fractured a cozy political consensus.

The results show Sunday's vote was one of the toughest challenges in decades to Sweden's social democracy, characterized by its high tax rates and substantial welfare system, aimed at reducing inequality through social inclusion. We must gather all good forces.

Sweden, recognized for its open-door immigration policy, has always been a destination for refugees.

After a campaign dominated by debates over immigration, the centre-left Social Democratic Party emerged with the greatest share of the vote - 28.4 per cent as the count neared completion - yet looking at holding fewer parliament seats and having its mandate to govern questioned.

Young members of the Sweden Democrats react to the results of the exit polls at their party election centre on Sunday.

"But despite this, the voters have made the Social Democrats the biggest party", he said to cheers from supporters.

But the traditional polls greatly underestimated support for the Sweden Democrats before the previous election, while the online surveys were far closer to the result.

Sweden's current government had already hardened its generous immigration policies to reflect growing public frustration.

Social Democratic Prime Minister Stefan Lofven has repeatedly called the legislative elections a "referendum on the future of the welfare state".

Kristersson called on Lofven to resign, but rebuffed Akesson. He said his party had "won" the elections because of its gain in seats.

Jimmie Åkesson, Sweden Democrats leader, promised to wield "real influence" in parliament after the modest gains.

"There is no side with a majority".

Far-right populists in Europe, however, were celebrating the Sweden Democrats' rise.

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It is not easy to shoehorn the modern Sweden Democrats into the familiar jackboots of the European far right. "That's why the Sweden Democrats are as big as they seem to be", he told CNN in Stockholm.

Voting in central Stockholm, student Katze Collmar, 32, said the campaign had been "really unpleasant".

"We are not going to retreat one millimetre in the face of hatred and extremism wherever it shows itself", Lofven said.

But it would then be under constant threat from the Sweden Democrats, out to topple it at the first opportunity. "Only 30,000 votes separate the two blocs and 200,000 more votes from overseas are to be counted on Wednesday", said David Ahlin, opinions chief at the market research company Ipsos.

Mattias, a Stockholm resident at an election night party in the city, said he was "extremely concerned" about the far right's steady climb.

"I'm afraid we're becoming a society that is more hostile to foreigners".

The Sweden Democrats, a party with white supremacist roots, came third with 17.6 percent, about 5 percentage points more than four years ago. "We used to be a very calm nation", she said.

Moderates leader Ulf Kristersson meanwhile said that after the election, Sweden would need "a strong cross-bloc cooperation to isolate the forces. pushing for Sweden to withdraw from worldwide cooperation".

With the prospect of weeks or months of coalition talks before the next government is formed, Swedish tabloid Expressen headlined its front page Monday: "Chaos".

But the opposition is intent on ousting Lofven, with some Moderates willing to go so far as to put an end to SD's pariah status and open negotiations with them.

He will therefore try to enlist the backing of two smaller parties on the centre-right, the Centre and Liberal parties.

"Most pointed towards the Sweden Democrats taking over the position as the second-biggest party in Sweden".