Germany's CDU, the party of Chancellor Angela Merkel, has suffered historic losses in Berlin state elections, BBC reported on Monday.
It has been ousted from the state governing coalition with the centre-left Social Democrats.
Meanwhile right-wing anti-migrant party Alternative for Germany (AfD) will enter the state parliament for the first time with 14% of the vote.
Merkel's popularity has waned since her decision last year to allow more than a million migrants into Germany. The CDU won 17.6% of the vote - its worst-ever result in Berlin.
It is the party's second electoral blow this month, having been pushed into third place by AfD in Mecklenburg-Western Pomerania. AfD will now be represented in 10 out of 16 state parliaments.
The Social Democrat SPD emerged as the strongest party with about 22%, in spite of losing almost 7% of their voters, and said it would hold talks on forming a coalition with all parties except AfD. It is expected to drop the CDU as a coalition partner in favour of the left-wing Die Linke and the Greens.
AfD's strong showing prompted its co-chairman Joerg Meuthen to say the party was strongly positioned for next year's national elections."We are firmly convinced that we will end next year with a double-digit result,''
he said. It's being described as the "Merkel malaise".
Germany's political landscape is changing. The anti-migrant, anti-Muslim rhetoric of AfD resonates with the electorate. The party is now almost certain to win seats in the national parliament next year which could complicate coalition building. Commentators predict the start of a more complex politics.
Sunday's election in Berlin, a city-state of 3.5 million people, was dominated by local issues including poor public services, crumbling school buildings, late trains and a housing shortage, as well as problems in coping with the migrant influx.