The move has polarised voters and fractured the long-standing political consensus.
While most pollsters see the two blocs winning roughly equal support, the figures for the Sweden Democrats differ widely between surveys. We must gather all good forces.
The ruling Social Democrats and Greens, and their parliament ally the Left Party, were backed by 39.5 percent, according to Friday's poll by Novus for public service broadcaster SVT.
Swedish media reported that voters and journalists were harassed at several polling places by members of a neo-Nazi movement, including some running in the parliamentary election.
Sweden Democrats leader Jimmie Akesson said his party were the "real winners" of the election and would act as "kingmakers" in the formation of a new government. What is preventing the traditional conservative parties in Sweden from working with them to form a government?
At the party's rally on Saturday, he strongly criticized Lofven's government for "prioritizing" the cause of immigrants over the needs of citizens.
Kristersson called on Lofven to resign, but rebuffed Akesson.
He said the election result marked "the death of bloc politics" in Sweden.
Far-right populists in Europe, however, were celebrating the Sweden Democrats' rise.
"They don't fit in in Sweden and of course then it's hard to find a job". "The democratic revolution in Europe is underway!"
"The election is between potential democracy and potential facism", he told AFP.
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Lofven had urged Swedes not to vote for what he called a "racist party" as he cast his ballot Sunday.
"Lofven had called the election a "referendum on the future of the welfare state", but the far right presented it as a vote on immigrants and their integration".
"It has been really unpleasant", student Katze Collmar, 32, said while voting in central Stockholm.
The leader of a far-right party that campaigned with an anti-migrant message says the party has "won" Sweden's national election.
This item has been corrected to show the ruling party represents the center-left, not center-right. It's more that we have had an integration issue for maybe 20 years. "We are the guarantee to oust the current government from power", he said. Sweden's general elections will be held on Sunday, Sept. 9.
Just last month, a spate of more than 80 arsons in a few hours in the Swedish city of Gothenburg drove Social Democratic Prime Minister Stefan Löfven to toy with deploying the military to heavily immigrant neighborhoods outside city centers.
Lengthy negotiations will be needed to build a majority, or at least a minority that won't be toppled by the opposite side.
The "Alliance" of the four centre-right parties led by the Moderates had 40.3 per cent and 143 seats.
The Sweden Democrats are bidding to become the biggest populist party in the Nordic region, topping the Danish People's Party, which gained 21 percent in 2015, and trump the 12.6 percent for the far-right Alternative for Germany, which swept into the Bundestag previous year.
"The problems in society that we warned of have grown bigger and worse and people agree with our view of reality", Sweden Democrats parliamentary group leader Mattias Karlsson told SVT. "What will happen to me if they enter government or gain influence", asked Mohammad, an 18-year-old Afghan refugee who spoke flawless Swedish when interviewed by AFP.
"He who understands first that he can talk to me will have the easiest time building a government and leading this country for the next four years", he said.