A party or coalition needs to get 25 per cent of the national votes or one-fifth of the total seats in parliament in order to field a candidate for the presidential vote in July.
Unofficial results released on Friday by five polling agencies indicated that the Democrat party would become the largest in the 560-seat lower house, having won 20 per cent of the popular vote.
"For me, those who have goodwill in running a better government for the next five years deserve to form a coalition, from any ideologies, as long as they have a good track record"
Susilo Bambang Yudhoyono, Indonesia's president
In the last general election in 2004, it was the fifth largest party.
Projections by the independent Indonesian Survey Institute (LSI) have the Democrats winning 20.48 per cent of the vote, based on its own count of ballots from a representative sample of 2,100 polling stations.
The opposition Democratic Party of Struggle (PDI-P) of Megawati Sukarnoputri, a former president, gained 14.33 per cent and Golkar was close behind with 13.95 per cent.
No official results have been released, and the final official count is not expected until May 9.
Yudhoyono's administration has delivered strong economic growth and brought relative peace and stability to the world's most populous Muslim-majority nation. Tackling endemic corruption has proved harder.
Analysts argue a coalition might slow pace of change, but they still expect the government's policies to remain market-friendly, particularly if Yudhoyono keeps Sri Mulyani Indrawati, his finance minister.
Kevin O'Rourke, a political risk analyst, said: "It's a very disappointing performance for the Democrat party at this stage.
|Yudhoyono is expected to form a coalition in order to implement political reforms [AFP]
"Yudhoyono is going to have to rely on other parties as allies and this could mean another slow five years for institutional reform.
"Yudhoyono is probably most likely to make practical alliances in the next parliament, allying with Golkar on market-oriented issues, but allowing the Islamic-oriented parties to influence institutional reform issues."
Thursday's elections were marred by violence in the eastern province of Papua where five people were killed. Pro-independence sentiment in the province runs high.
Indonesia took formal control of the region in a 1969 UN-sponsored vote by select tribal elders, widely seen as a sham, and the area has seen a long-running insurgency waged by pro-independence fighters.
There were also some complaints, including from the president, about irregularities with the vote, but generally polling was said to be peaceful.
The one-day vote was a complex logistical exercise, capping a decade of democracy for Indonesia's more than 170 million eligible voters, with tens of thousands of security personnel deployed and about half a million polling stations spread across the archipelago.