Saimnieks, which means Master, took 18 seats to emerge as the biggest party in the 100-seat parliament. The ruling Latvia's Way party dropped one seat but still came second with 17 deputies.
But the right-wing People's Movement for Latvia, also known as the Siegerist Party, gained a shock 16 seats to be the third biggest party in parliament.
The party is led by maverick German politician Joachim Siegerist -- who cannot speak Latvian -- whose stance has been strongly anti-Russian and anti-communist. However, its other key policies are unclear.
Some 700,000 ethnic Russians live in Latvia. Most do not have citizenship and are not allowed to vote in the elections.
Weeks or even months of haggling are now likely as the biggest parties seek compromise to form a coalition that can command a majority in the parliament.
"The results are fantastically good and I counted on that," Siegerist told Latvian television early Monday.
Analysts said Siegerist's brand of populist politics had swung the undecided voters on election day.
His party runs an office which offers free medicine to Riga pensioners and in an earlier election he transported voters to polling stations by bus and gave out free bananas and lemonade.
"It's an example of the gaping hole that exists between the Latvian political elite and people who live in the countryside, where they feel absolutely alienated from what is happening in Riga and in government," said Paul Raudsep, managing editor of the daily newspaper Diena, explaining Siegerist's success.
The result went against pre-election opinion polls which predicted that a bloc of two right-leaning parties, the Farmers Union and the LNNK, had a good chance of gaining enough seats between them to form the core of a coalition government.
A Message from The Moscow Times:
Dear readers,
We are facing unprecedented challenges. Russia's Prosecutor General's Office has designated The Moscow Times as an "undesirable" organization, criminalizing our work and putting our staff at risk of prosecution. This follows our earlier unjust labeling as a "foreign agent."
These actions are direct attempts to silence independent journalism in Russia. The authorities claim our work "discredits the decisions of the Russian leadership." We see things differently: we strive to provide accurate, unbiased reporting on Russia.
We, the journalists of The Moscow Times, refuse to be silenced. But to continue our work, we need your help.
Your support, no matter how small, makes a world of difference. If you can, please support us monthly starting from just $2. It's quick to set up, and every contribution makes a significant impact.
By supporting The Moscow Times, you're defending open, independent journalism in the face of repression. Thank you for standing with us.
Remind me later.