Her centre-right coalition partners risked ejection from parliament for the first time in their post Second World War history.
Ms Merkel could also find herself leading a “grand coalition” government with the left-leaning Social Democrats.
“This is a super result,” said Ms Merkel, who can now expect to serve a third term.
Ms Merkel’s conservative bloc — the Christian Democratic Union and Bavarian Christian Social Union — won about 42% of the vote, an improvement of more than eight points over Germany’s last election in 2009, according to ARD and ZDF television projections based on exit polls and early counting.
Her coalition partners of the past four years, the pro-business Free Democrats, were just below the 5% level needed to claim seats in the lower house, according to the projections.
Nevertheless, the conservatives strong showing was a victory for Ms Merkel as she solidified her position as Europe’s strongest political leader.
“We will do everything together in the next four years to make them successful years for Germany,” Ms Merkel said.
Cheers and chants of “Angie! Angie! Angie!” could be heard as she made a brief appearance at her party’s headquarters.
Centre-left challenger Peer Steinbrueck’s Social Democrats trailed well behind Ms Merkel’s party with up to 26.5%, last night’s projections showed.
If Ms Merkel’s current coalition lacks a majority, the likeliest outcome is a Merkel-led alliance with the Social Democrats.
The two parties are traditional rivals but governed Germany together in Ms Merkel’s first term after an inconclusive 2005 election.