Final results in German regional polls show the far right has won seats in an eastern state and Chancellor Angela Merkel's party has performed poorly.
The NPD will have six seats in Mecklenburg-Western Pomerania
The National Democratic Party (NPD) won 7.3% in Mecklenburg-Western Pomerania, surpassing the 5% needed to enter the state parliament.
Germany's previous government compared the NPD to the early Nazi party.
In Berlin, waning support had Mrs Merkel's Christian Democrat party trailing the Social Democrats.
The re-election of Klaus Wowereit as mayor of the German capital had been predicted, and following the result Mr Wowereit said he would hold talks with both the ex-communists and the resurgent Greens on forming a coalition.
The BBC's Tristana Moore in Berlin says the results represent another setback for the Christian Democrats which have been haemorrhaging support at the national lead because of infighting.
In Mecklenburg-Western Pomerania, a rural region bordering Poland which includes Mrs Merkel's home constituency, the NPD secured six seats in the 71-member parliament.
It is a significant rise from its last poll showing, when it managed to secure less than 1% of the vote.
Both the Christian Democrats led by Mrs Merkel and the Social Democrats called on the public to turn away from the far-right parties, following the polls.
Mrs Merkel said the result was "extraordinarily regrettable", according to the Associated Press news agency.
She said far-right parties must be fought by transforming "hopelessness into prospects for people".
Social Democrats leader Kurt Beck said more funding was needed to fight the far-right parties.
When in office, former Chancellor Gerhard Schroeder described the NPD as a latter-day version of Hitler's Nazi party and tried to have it banned for fomenting racial violence, but Germany's Supreme Court rejected Mr Schroeder's attempt in 2003.
The NPD's support is partly explained by its hard anti-immigrant stance in Mecklenburg-Western Pomerania, where unemployment runs at more than 18% - the highest in the country.
Manufacturing has collapsed across the former East German state following reunification in 1990, forcing many of its residents to go west in search of work.
Two states in former communist eastern Germany already have far-right MPs.
The NPD has lawmakers in the state of Saxony, following regional elections in 2004.
Another far right party - the German People's Union (DVU) - entered parliament in the state of Brandenburg.