Results from Serbia's elections point to a triumph for President Boris Tadic's pro-European Union bloc.
Mr Tadic claimed victory, with his bloc set to win nearly 40% of the vote, but he may need the support of at least one nationalist party for a majority.
The European Union has welcomed what it called a clear victory for pro-European forces in the parliamentary elections.
The nationalist Radical Party, though, insists that it could still head a coalition forming the next government.
Ultra-nationalist leader Tomislav Nikolic said he would have talks with parties which were close ideologically.
Formation of the new government could take up to three months, analysts warn.
Kosovo
With nearly 98% of votes counted, Mr Tadic's For a European Serbia alliance had 38.75%, followed by Mr Nikolic's Radicals on 29.2%, the State Electoral Commission said.
In a victory speech, President Tadic said the Serbian people had in effect given their approval to the country's future membership of the EU, with whom a long-delayed agreement was signed just before the election.
ELECTION RESULTS
"The citizens of Serbia have undoubtedly confirmed a clear European path", he said, adding: "It is necessary to form a government as soon as possible".
But he also vowed that a new government led by his Democratic Party would not recognise Serbia's breakaway province of Kosovo as an independent state.
Mr Tadic faces the challenge of finding stable partners for his already complex three-party coalition without making too many political concessions, the BBC's Ivana Miloradovic reports.
Even with the support of Hungarian, Muslim and Albanian minority parties and the small Liberal Democrats - the only party ready to recognise the independence of Kosovo - his coalition falls short of the necessary majority.
The previous government fell over the issue of how to react when most EU countries recognised the independence of Kosovo.
Coalition
The Radicals' leader said he planned to meet both the Democratic Party of Serbia of outgoing Prime Minister Vojislav Kostunica and the Socialists - the party of the late Serbian strongman Slobodan Milosevic.
"There is a big chance that the Radicals will be able to form a coalition with Kostunica and the Socialists - and that will be disastrous for Serbia"
Theoretically, the three parties could form a coalition with a wafer-thin majority in parliament.
Either the three parties would form a coalition, Mr Nikolic said, or Serbia would "not have a government at all and [would] have to go to new elections".
Mr Kostunica said after the election that he was open to talks with the Radicals.
"It's too early to say anything specific, but I hope that we will be one of the main players in the formation of the new government," he added.
Parties have a legal deadline of three months to reach agreement.
International isolation
Ironically, the key player that could make or break any future coalition seems to be the Socialists.
The party responsible for the country's international isolation under Milosevic has reinvented itself as an advocate of social justice and attracts many young, often poor or unemployed voters.
Mr Kostunica's coalition would be a less desirable partner for the pro-EU bloc and the political cost of attracting it back into a new government could prove to be too high.
A statement from the EU's Slovenian presidency welcomed a "clear victory" for pro-European forces, and said it hoped they would quickly form a government
Serbs in Kosovo also voted, both in the general election and in council elections, in defiance of the ethnic Albanian government and international authorities.
Some 300 polling stations opened in areas with a sizeable Serb population and the vote passed off peacefully.
However, even before the polls closed, the United Nations mission issued a statement condemning the council elections as illegal and saying the results would not be recognised.
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