The Social Democrats and chancellor Angela Merkel's Christian Democratic Party have emerged from Berlin state elections as the strongest two parties.
But both parties lost enough support to ensure they will not be able to continue a coalition government together, according to exit polls on Sunday.
The SPD won 23% of the vote, dropping 5.3%, while the CDU won 18%, down 5.4%, ARD public television reported.
The vote comes two weeks after Mrs Merkel's CDU came in third in the eastern state of Mecklenburg-Western Pomerania, and Sunday's showing - her party's worst in the capital - will keep up the pressure on the chancellor a year ahead of national elections.
However, it was largely local issues that drove the vote in the city of 3.5 million.
Disillusionment is high over the capital's notoriously inefficient bureaucracy and issues such as years of delays in opening its new airport.
Peter Tauber, the Christian Democrats' general secretary, blamed Social Democratic mayor Michael Mueller for turning voters against the two governing parties, saying "the fish stinks from the head".
Mr Mueller, however, said after the results that "we have achieved our goal".
"We are the strongest political party and we have a mandate to form a government," he said.
The anti-immigrant nationalist Alternative for Germany party won 11.5% of the vote, behind the Greens and the Left party, each with 16.5%, but with more than enough to enter Berlin's state parliament, its 10th nationwide.
Without enough support for the governing SPD-CDU "grand coalition" to continue, the most likely new governing alliance appeared to be a combination of the SPD, Greens and Left party.
Such a configuration "is not a good perspective for Berlin" Mr Tauber said on Twitter.