The Chancellor secured a third term at the lead of Europe's strongest economy but she still faces the delicate task of forming a coalition government.
"This is a super result," Merkel told cheering supporters at her Christian Democratic Union (CDU) party headquarters in Berlin.
"We can celebrate tonight because we have done something fantastic."
CDU and its Bavarian sister CSU finished only five seats short of an absolute majority in the lower house, or Bundestag, a result that no party has reached in more than 50 years.
"We will do all we can in the next four years together to make them successful years for Germany," Merkel said.
"It is too early to say how we will proceed but today we should celebrate," she said.
However Merkel's coalition partner, the pro-business Free Democratic Party (FDP), crashed out of Parliament, winning only 0.2% less of the vote needed to clear the 5% hurdle to get into parliament.
"We have two possibilities: the Social Democrats or the Greens," Volker Kauder, the leader of CDU's parliamentary group, told ARD public Television. "We will determine in our committees how the talks should go."
The Social Democrats (SPD), CDU's main rivals, arrived second with 26%. Merkel had already governed a grand coalition supported by the centre-left party in her first term.
SPD's top candidate Peer Steinbrück served as her financial minister.
"The ball is in Merkel's court," said Steinbrück, a former finance minister under Merkel who has said he won't serve under her again. "She has to get herself a majority."
Several weeks of negotiations are expected, regardless of whether Merkel forms a coalition with the Social Democrats or the Greens, which won 8.4% of the vote.
The new anti-euro party Alternative for Germany (AfD) and the Pirate Party were also left out of the parliament.