Mr Aso has an approval rating of around 20%
The ruling coalition of Japan's PM Taro Aso has been defeated in a Tokyo local election seen as a key popularity test prior to general elections.
Reports say the loss to the opposition Democratic Party (DPJ) could lead Mr Aso to dissolve parliament this week.
The DPJ won 54 seats to 38 for Mr Aso's Liberal Democratic Party, ending four decades of dominance in the assembly.
The defeat could also increase pressure on Mr Aso to quit as LDP leader before the national poll due by October.
The LDP and its coalition partner, New Komeito, together won 61 seats, three short of the 64 needed to secure a majority in Tokyo's 127-member assembly.
Before the vote, the bloc had 70 seats against 34 for the DPJ.
A senior LDP official acknowledged the electoral upset for the coalition and said his party now had to face "severe judgement from Tokyo residents".
"We are afraid that this impact on a general election will be quite big," said Nobuteru Ishihara.
DPJ leader Yukio Hatoyama called on Mr Aso to "ask for the people's voice by dissolving the lower house and calling a general election".
Mr Hatoyama said it was time for Mr Aso to call an election
Local media say Mr Aso might dissolve the lower house of parliament as early as Tuesday in preparation for a general election which could then take place as early as the first week of August.
But the BBC's Roland Buerk in Tokyo says many in Mr Aso's party fear such a move would be political suicide.
They would prefer he resigned and a new leader led them in polls closer to the October deadline, says our correspondent.
Mr Aso, who is the fourth prime minister since the last election to the more powerful lower house in 2005, has dismal approval ratings hovering around 20%.
His LDP party has governed Japan for the past half century, except for a break of less than a year in the 1990s.
But the opposition DPJ has promised to break the grip of the bureaucracy on policy making and increase social welfare measures.
Its support, however, has been eroded by fundraising scandals.
In the run up to the poll, many voters in the capital appeared to be largely indifferent, says our correspondent.
Candidates wearing white gloves and sashes toured the streets in vans using loudspeakers to campaign, he says.
Some resorted to making speeches in front of deserted city car parks, their words echoing off the surrounding apartment blocks.