Her conservative CDU/CSU alliance won 32.5 per cent of the vote, remaining the largest party in Germany’s parliament, according to the ARD poll.
Its outgoing coalition partner, the social democratic SPD, said it would go into opposition after winning 20 per cent.
In a result which shocked many, the nationalist AfD was on track to win 13.5 per cent making it the third party, BBC reports.
Addressing supporters, Mrs Merkel said she had hoped for a “better result” and talked about “extraordinary challenges”.
She would listen, she said, to the “concerns and anxieties” of AfD voters in order to win them back.
The numbers mean the SPD, led by Martin Schulz, has fallen to a new post-World War Two low.
Mr Schulz said the result was the end of the “grand coalition” with Mrs Merkel’s alliance.
“It’s a difficult and bitter day for social democrats in Germany,” he told supporters. “We haven’t reached our objective.”
AfD’s performance, better than forecast in opinion polls, means the right-wing party will have seats in the Bundestag for the first time.
Prominent AfD figure Frauke Petry said on Twitter (in German) that Germany had experienced an incomparable “political earthquake”.
The exit poll puts the Liberal FDP on 10.5 per cent, the Greens on 9.5 per cent and Die Linke (The Left) on niney per cent.
Mrs Merkel will now have to search for new coalition partners, a process that could take months.
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