The Green Party, its partner in government, nearly lost its place in parliament with 4.3 per cent (- 2.4) and it and the Conservatives ('Moderates') with 18.8 per cent (-3.5) suffered big losses. He, like all of the other parties, has categorically ruled out any cooperation with the far-right. It was formed in 2004 to counter decades of dominance by the Social Democrats.
Far-right parties have gained strength in elections in recent years in several European countries, including Germany and Italy.
So - why won't the Sweden Democrats form a coalition Government?
Neither the governing Social Democrats nor the centre-right bloc of parties are predicted to win a majority.
TT News Agency / Reuters Sweden Democrats party leader Jimmie Akesson gives a speech in Landskrona, Sweden, on August 31, 2018.
The current coalition, headed by outgoing PM Stefan Lofven, is made up of his Social Democrats and the Green Party, and is supported in parliament by the Left Party.
While the results need to be taken with caution - the votes of Swedish expats living overseas are not included yet and will only be released sometime this week, it seems clear already: the right-wing "populists" once again performed well, while finding a government will be tough for everyone involved.
Sky's Michelle Clifford, who is reporting from the Sweden Democrats' election party, said: "They have done well, but the aspirations from the polls was that they would be the second largest, but that doesn't seem so".
Sweden's Prime Minister and leader of the Social Democrat party, Stefan Lofven, speaks at an election party at the Fargfabriken art hall in Stockholm.
Leaders of the four centre-right Alliance parties will meet on Monday with the goal of forming a new government, but without support from the Sweden Democrats they do not have a majority. The Sweden Democrats hotly deny these claims. "We don't know who will form the next government, we will probably not know tomorrow, next week or next month", Wolodarski told Al Jazeera.
The Sweden Democrats came third with 17.6 percent, about 5 percentage points more than four years ago.
Sweden's Social Democrats have been the largest party in the Riksdag for more than 100 years.
A possible future centre-right government has promised to make the labour market more flexible by letting SMEs make more exceptions from the first-in-last-out principle of Swedish labour legislation. And the party is a far cry from its first-ever national election in 1988, when it won less than 0.1 percent of the vote.
If Lofven doesn't resign, he faces a confidence vote in parliament two weeks after the election.
"It's not that they are shy voters, but that they are distrustful of the polling agencies", said Henrik Ekengren Oscarsson, a professor in political science at Gothenburg University. Thus, some have argued , there is even a (very small) chance that Annie Lööf from the fourth-place Center Party, despite only having gotten 8.6 percent of the vote, could become the next Prime Minister - this is only due to the fact she would be the least objectionable candidate for the other parties. No other party will consider the anti-migrant hard-right group in any form of coalition.
Mr Akesson had labelled the vote a choice between immigration and welfare in a campaign that was unusually antagonistic. In theory, this might mean that the Sweden Democrats could become a kingmaker, although both blocs have said they would refuse to work with the far-right party. Voters on Sunday did not doubt the Nordic welfare model, but many hesitate to let more immigrants without similar cultural traits share the system. Instead, it told a more subtle but increasingly familiar tale now seen across a variety of European parliamentary systems and perhaps further afield, too - that of increasing political fragmentation and the slow decline of dominant political parties.