The move has polarised voters and fractured the long-standing political consensus.
We really need a big change in Sweden, another way of thinking.
The far-right's claims, experts say, often did not match reality.
"We need consistent policies and level-headed, matter-of-fact discussion on migration".
Neither Lofven's "red-green" bloc nor the opposition centre-right four-party Alliance (Moderates, Centre, Liberals and Christian Democrats) were expected to win a majority in parliament. Meanwhile, the far-right Sweden Democrats won 17.6 percent of the vote in its best ever result. Thankfully for them, their most important rival - the center-right Moderate Party - also had a relatively poor showing, losing 3.5 percent of its 2014 vote despite considerable problems faced by the governing coalition.
"Now we will gain influence in Swedish politics for real", Sweden Democrat Jimmie Akesson told a cheering crowd of supporters as the results came in.
Prime Minister Stefan Lofven stumped Saturday for his party, the Social Democrats, while portraying the Sweden Democrats as racist.
The bad outcome for Lofven's party prompted the leader of the centre-right alliance, conservative Ulf Kristersson, to call for Lofven's resignation.
"This government we have had now. they have prioritized, during these four years, asylum-seekers", Akesson said, giving an exhaustive list of things he says the government has failed to do for Swedish society because of migrants.
With neither main bloc able to command a majority, the Sweden Democrats - who want the country to leave the European Union and put a freeze on immigration - could play a decisive role in negotiations over forming a government. But since neither of the established political blocks are willing to form a government reliant on the support of The Sweden Democrats, the election is without a clear result. He, like all of the other parties, has categorically ruled out any cooperation with the far-right.
Danish delegate Michael Aastrup Jensen, who has previously monitored elections in Russian Federation and Eastern Europe, told Berlinske: "In all the many election observations I've been on, I have not seen anything that comes close to how undemocratic the Swedish voting system is".
Lengthening queues for critical operations, shortages of doctors and teachers and the failures of police to deal with inner-city gang violence have shaken faith in the "Swedish model", built on a promise of comprehensive welfare and social inclusion.
Prime Minister Stefan Lofven, who brought the Social Democrats to power in 2014, said he meant to remain in the job.
"It's. about decency, about a decent democracy".
"We used to be very safe".
That is kind of confusing for a lot of people, to say the least. Emilia Orpana said she and another party supporter were threatened by two young men who called them 'damned racists'.
Rather than copying the far-right's emotional appeals toward identity and its criticism of the state, mainstream parties should offer voters fresh alternatives, Berman said. "So I go see people and ask them if they have Swedish citizenship and if they do I tell them that it's important to go vote", Sofie, a Turkish woman in her 50s told AFP.
Voting stations opened at 0600 GMT and will close at 1800 GMT, with exit polls set be published by Sweden's two main broadcasters.
Stefan Löfven said that he would not be resigning and instead urged for a cross-bloc cooperation.
What happens now is that the political parties will engage in negotiations on how to form a coalition government, and the parliament will vote on who will be prime minister on the 25th of September.
With both options unpalatable to the traditional players, forming a government could take weeks.
"There is no side with a majority. That's why the Sweden Democrats are as big as they seem to be", he told CNN in Stockholm.
The centre-right Alliance was nearly in a dead-heat with 40.3%.
"I believe that it must be the largest party in Sweden that forms a government".
"This party has increased and made the biggest gains".