14 September 2014
Last updated at 20:07 ET
Social Democrats leader Stefan Lofven said there were many challenges after eight years of centre-right rule
Partial results show Stefan Lofven's opposition party are set to return to power, but with no clear majority.
They give the centre-left bloc 43.7%, ahead of the 39.3% for PM Fredrik Reinfeldt's Moderate Party. The far-right Sweden Democrats were at 13%.
Mr Reinfeldt conceded defeat and said he will step down as PM on Monday.
"The centre-left has more seats [in parliament] than our alliance," Mr Reinfeldt told his supporters. "So tomorrow I am going to hand in mine and my government's resignation."
He also confirmed that he would step down as leader of the conservative Moderate Party.
Mr Lofven said the country needed a "new direction" and faced major challenges after eight years of centre-right rule.
"We are in a serious situation. We have thousands of people unemployed, We have school results that are declining more than in any other OECD [Organisation for Economic Co-operation and Development] country," he said.
Analysis: Lars Bevanger, BBC News, Stockholm
The Social Democrats, Greens and Left Party have fallen short
of a parliamentary majority, leaving them dependent on support from the
far-right, anti-immigration Sweden Democrats, which became the country's
third largest party with close to 13% of the vote.
Sweden receives more asylum applications per capita than any other European country, and recently offered permanent residency to all Syrians fleeing the war there. The Swedish Democrats are the only party which opposes the country's immigration policy.
Yet all the mainstream parties still consider them to be too radical to work with.
That means the new prime minister might have to cross the floor and try to secure the votes of parties on the right of centre - the outgoing government - on a case-by-case basis.
Sweden turns left as far right soars
Since coming to power in 2006, Mr Reinfeldt's coalition
government has cut income and corporate taxes, abolished a tax on wealth
and trimmed welfare benefits.
It has also privatised several state-owned companies, including the maker of Absolut vodka.
The results signal a return to normality in Swedish politics. The Social Democrats have not been in opposition for so long since first taking power in 1920.
With more than 99% of votes counted, the Social Democrats, Greens and Left parties look set to win around 159 seats in the 349-seat parliament, short of a majority.
Mr Lofven told supporters in Stockholm that he would now explore the possibilities of forming a government, but would not cooperate with the Sweden Democrats.
Far-right kingmaker? The far-right anti-immigration party are set to become the country's third largest party.
Correspondents say they could hold the balance of power.
"We're the absolute kingmaker in parliament now," Jimmie Aakesson, leader of the far-right party, told reporters.
"You have to be able to govern this country for four years," Mr Aakesson told broadcaster SVT, "and it's going to be hard if they are not prepared to talk to us or listen to us."
But Mr Lofven insisted he would not turn to the far-right party. "We will make sure they don't get that kingmaker role," he told supporters.
The Sweden Democrats, who entered parliament for the first time in 2010, are alone in opposing the country's liberal immigration policy.
Sweden this year expects up to 80,000 asylum-seekers from Syria, Eritrea, Somalia, Afghanistan, Iraq and other countries - the highest number since 1992.
Meanwhile, results confirm that a small feminist party who had hoped to enter parliament failed to reach the 4% threshold.
The Feminist Initiative were hoping to overcome a 4% threshold to get into parliament
Sweden election: Social Democrats rule out far-right pact
Social Democrats leader Stefan Lofven said there were many challenges after eight years of centre-right rule
The
leader of Sweden's Social Democrats says he will try to form a
government after their election win, but will not work with the far
right.
They give the centre-left bloc 43.7%, ahead of the 39.3% for PM Fredrik Reinfeldt's Moderate Party. The far-right Sweden Democrats were at 13%.
Mr Reinfeldt conceded defeat and said he will step down as PM on Monday.
"The centre-left has more seats [in parliament] than our alliance," Mr Reinfeldt told his supporters. "So tomorrow I am going to hand in mine and my government's resignation."
He also confirmed that he would step down as leader of the conservative Moderate Party.
Mr Lofven said the country needed a "new direction" and faced major challenges after eight years of centre-right rule.
"We are in a serious situation. We have thousands of people unemployed, We have school results that are declining more than in any other OECD [Organisation for Economic Co-operation and Development] country," he said.
Sweden receives more asylum applications per capita than any other European country, and recently offered permanent residency to all Syrians fleeing the war there. The Swedish Democrats are the only party which opposes the country's immigration policy.
Yet all the mainstream parties still consider them to be too radical to work with.
That means the new prime minister might have to cross the floor and try to secure the votes of parties on the right of centre - the outgoing government - on a case-by-case basis.
Sweden turns left as far right soars
Prime Minister Fredrik Reinfeldt took office in 2006 and is the country's longest serving conservative leader
It has also privatised several state-owned companies, including the maker of Absolut vodka.
The results signal a return to normality in Swedish politics. The Social Democrats have not been in opposition for so long since first taking power in 1920.
With more than 99% of votes counted, the Social Democrats, Greens and Left parties look set to win around 159 seats in the 349-seat parliament, short of a majority.
Mr Lofven told supporters in Stockholm that he would now explore the possibilities of forming a government, but would not cooperate with the Sweden Democrats.
Far-right kingmaker? The far-right anti-immigration party are set to become the country's third largest party.
Correspondents say they could hold the balance of power.
"We're the absolute kingmaker in parliament now," Jimmie Aakesson, leader of the far-right party, told reporters.
"You have to be able to govern this country for four years," Mr Aakesson told broadcaster SVT, "and it's going to be hard if they are not prepared to talk to us or listen to us."
But Mr Lofven insisted he would not turn to the far-right party. "We will make sure they don't get that kingmaker role," he told supporters.
The Sweden Democrats, who entered parliament for the first time in 2010, are alone in opposing the country's liberal immigration policy.
Sweden this year expects up to 80,000 asylum-seekers from Syria, Eritrea, Somalia, Afghanistan, Iraq and other countries - the highest number since 1992.
Meanwhile, results confirm that a small feminist party who had hoped to enter parliament failed to reach the 4% threshold.
The Feminist Initiative were hoping to overcome a 4% threshold to get into parliament
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Reuters UK Sweden votes for minority left government, far right surges 1 hr ago
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MSN UK Sweden shifts to left in election 2 hrs ago
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Guardian.co.uk Sweden set for minority-left coalition 2 hrs ago
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New Statesman Social Democrat victory in Swedish election marred by far-right surge 2 hrs ago
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