The Sweden Democrats, born as a far-right political movement and now an anti-immigration party, garnered a little under 18% of the vote.
The government's finance minister suggested refugees seek another country in which to claim asylum, while Prime Minister Stefan Löfven announced that the country would crack down on criminals, and the party declared that emergency border security laws from the height of the refugee crisis would be kept in place indefinitely.
The Alliance would need the far-right's support to obtain a majority in parliament, and would have to either make policy concessions in exchange for the Sweden Democrats' support or offer key positions on parliamentary committees that draft legislation.
The Social Democrats, traditionally the biggest party and who have led a minority government with the Greens, have lost support on both the left and the right and are tipped to post their lowest score since 1911. Please refresh the page for the fullest version.
Akesson labelled the vote a choice between immigration and welfare in a campaign that was unusually antagonistic.
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".
Swedes went to the polls on Sunday and although it will take some time for a ruling coalition to emerge, the biggest immediate victor appears to be the party that won't form a government. Indeed, though the far-right party did gain a considerable amount of votes, it failed to live up to its surge in the last election in 2014, and it remained in third place.
During a heated debate Friday evening, party leader Jimmie Akesson caused a stir by saying migrants have trouble finding jobs because "they can't adjust to Sweden".
Meanwhile, Finance Minister and National Coalition Party leader Petteri Orpo tweeted that Sweden's election results seem to follow the current trend in Europe of party landscapes becoming increasingly fragmented. "The other parties can't ignore them any more", he said.
The centre-left party emerged with the greatest share of the vote - 28.4% as the count neared completion - yet looking at holding fewer parliament seats than four years ago.
The nationalist Sweden Democrats were on track to get 17.8 percent.
That same scenario has played out similarly in countries across Europe, where traditional left and right parties have employed similar strategies to regain voters from populist parties, largely without success. The election will be Sweden's first since the government in 2015 allowed 163,000 migrants into the country of 10 million.
"We are Sweden's biggest party", Lofven said late Sunday. "It's also about decency, about a decent democracy ... and not letting the Sweden Democrats, an extremist party, a racist party, get any influence in the government". Both sides are keeping the Sweden Democrats, an anti-immigrant party with roots in a neo-Nazi movement that got almost 18 percent, at arm's length.
Prime Minister Lofven, who brought the Social Democrats to power in 2014, said he meant to remain in the job. "We used to be a very calm nation", she said.
"When the same party time and again increases, and the other parties stand still, then you have to listen to that part of the population that is voting for this party".
At any rate, he said, it was time for Sweden's political parties to bring an end to their refusal to negotiate and form deals with the Sweden Democrats.