The figures may change when the final count is in but the result is seen as a clear disaster for Mrs Merkel.
The result will further plunge her prospects of serving a fourth term in office in doubt when Germany stages its general election in the autumn of 2017.
The vote on Sunday, according to Mail Online, in the state, where she has had her own constituency since 1990, was a referendum on her controversial refugee programme which has seen more than a million people enter the country in the past 12 months.
Germans are frightened of losing their national identity, of terrorism – two refugees carried out attacks in the country in July – and of escalating sex crime. In Essen on Friday night there were more incidents of immigrant men sexually assaulting women at a street festival.
Mecklenburg-Western Pormerania is Germany’s poorest state and elections are usually decided on economic issues. But this one was fought solely on the refugee question.
After the AfD win the party leader Frauke Petry said: “We have made history here today.”
The result in the state, currently ruled in a coalition with her CDU and the centre-left SPD, proves that Mrs Merkel is failing to connect with voters. A new poll out on Friday showed that her approval levels have slumped to their lowest for five years.
The SPD came out on top in Mecklenburg Western-Pomerania with 30 percent of the vote, meaning it can still form a coalition with the CDU but could also go into power with the hard-left Die Linke party and the Greens.
The result is seen as Mrs Merkel’s fault alone she continues to ignore public opinion and insists that there will be no U-turn on her asylum policy.
In an interview published in Bild prior to the election, she said: ‘We did not reduce benefits for anyone in Germany as a result of the aid for refugees. In fact, we actually saw social improvements in some areas.
“We took nothing away from people here.
“We are still achieving our big goal of maintaining and improving the quality of life in Germany.”
Delivering a closing campaign speech on Saturday, in the state of 1.3 million voters north of Berlin, she continued to encourage a focus on Germany’s role to help those in need.
She said: “The vast majority of people are ready to help people in distress in the world. For that I am very thankful. We must maintain this stance.”
Hans-Herman Tiedje, a former policy adviser to legendary German chancellor Helmut Kohl, said: “The German people has not been asked once if it wants this demographic restructuring of our country.
“The good people of this world will maybe give her the Nobel Peace Prize–but domestically her politics are devastating.
“As to the poll – the AfD is indeed definitely not intellectual enrichment for our country, but it binds to itself voters who despair at Merkel’s policy.”