Germany’s centre-left Social Democrats (SPD) claimed victory in the federal election, telling the party of outgoing Chancellor Angela Merkel it should no longer be in power.
SPD leader Olaf Scholz said he had a clear mandate to form a government, while his conservative rival Armin Laschet remains determined to fight on.
The two parties have governed together for years.
But Mr Scholz says it is time for a new coalition with the Greens and liberals.
Preliminary results gave his party a narrow election win over the conservatives who suffered their worst-ever performance.
Despite this, Mr Laschet said his party had given him its backing to enter talks with coalition partners, pushing Germany towards a potentially protracted power struggle.
The Greens and pro-business FDP attracted the most support from the under-30s, in an election dominated by climate change and by differing proposals on how to tackle it. The Greens made history with almost 15% of the vote, even though it was well short of their ambitions.
It was the tightest race in years, bringing an end to the post-war domination of the two big parties – Mr Scholz’s SPD and his rival’s conservative Christian Democratic Union (CDU).
The main parties want a new government in place by the time Germany takes over the leadership of the G7 group of nations in January.