"All the parties except two of them, I would say, have moved toward us", Markus Wiechel, a member of parliament for the Sweden Democrats and the party's foreign-policy spokesman, said the week before the vote. A separate exit poll by TV4 also had the main blocs in a dead heat, but only gave the Sweden Democrats 16.3 per cent.
Far-right parties have gained strength in elections in recent years in several European countries, including Germany and Italy.
Sweden's economy is booming but many voters are concerned that housing, healthcare and welfare services have come under pressure from a wave of immigration during the 2015 migrant crisis.
The Sweden Democrats, led by Jimmie Akesson, links the country's rising crime rate to immigration, but official figures can't prove any correlation.
The nationalist Sweden Democrats scored 19.1 percent, well above the 12.9 percent they won in the previous election in 2014.
"We have increased our mandate in parliament and we see that we will have an enormous influence on what is happening in Sweden in the next week, the next few months and the next few years", he told supporters.
Overseas votes, which could make a slight change to the outcome, have not yet been counted and the final result is not expected until Wednesday.
Many online surveys, which in the last election had gauged the Sweden Democrats' vote better than conventional polls, had signalled they could dethrone the Social Democrats as the nation's biggest party - a position the centre-left has held for a century.
The Swedish prime minister has rejected calls to resign and said that "nothing will be determined" on an election night that has seen no clear victor emerge after major gains for an anti-immigration party.
The Sweden Democrats, a party rooted in a neo-Nazi movement but which has been working to soften its image, has been breaking down longstanding taboos surrounding public discourse on immigration and integration.
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All the party leaders seem to agree on one thing: forming a government is going to take time.
The Sweden Democrats, a withroots in the white supremacist fringe, won 17.6 percent and 63 seats.
Ahead of the election, promising prospects for the Sweden Democrats had many Swedes anxious about an erosion of the humanitarian values that have always been a foundation of their country's identity.
Sweden was looking at weeks of uncertainty and complex coalition talks after the country's two rival blocs failed to secure a clear governing majority in elections that saw a boost for a far-right party - considered political pariahs - amid growing discontent with large-scale immigration.
Over 99 percent of the votes have been counted, but one question remains unanswered after the Swedish election. The majority mark in the 349-seat parliament is 175 seats.
Clifford said the ruling Social Democrats could receive their worst results since 1908 and all parties had said they will not be collaborating with the ruling party, meaning any new regime would have to deal with a fragmented parliament. Some critics say that these situations also compel mainstream parties to pander toward the fringes - a criticism that certainly has emerged about Rutte.
But as Savage notes, that's not the case this year, in an unpredictable election where much of the vote has hinged on voter attitudes on the issue of immigration.
But, ultimately, the far right's gains have not been sufficient to put it in a position to push as hard as it might on its agenda. Thus, some have argued , there is even a (very small) chance that Annie Lööf from the fourth-place Center Party, despite only having gotten 8.6 percent of the vote, could become the next Prime Minister - this is only due to the fact she would be the least objectionable candidate for the other parties.
The prime minister must choose between: risking losing core voters by dealing with the party he calls racist; and bargaining, for the sake of his career.