A senior AK party official declared victory, saying it would win enough seats to form a single-party government for a second five-year term.
The polls closed at 5pm (14:00 GMT) on Sunday in a contest viewed as pivotal in determining the balance between Islam and secularism in the country.
The winning party will face a number of challenges, including a presidential election, violence in the Kurdish south and a growing divide over the role of Islam in society.
The next government will have to tackle rising Kurdish separatist violence in the east and decide whether the army can enter northern Iraq to crush Turkish Kurdish fighters based there - a move that is increasingly worrying the US.
It must also find a compromise candidate for president and speed up EU-inspired reforms or risk an economic backlash.
Analysts say this election is one of the most important in a quarter of a century because it is pivotal to Turkey's future direction.
Opposition parties say the vote is about defending Turkey's secular system against political Islam, though Erdogan laughs off CHP claims that he wants to turn Turkey, which bridges Europe and the Middle East, into an Iranian-style theocracy.
The AK party's record of economic growth of seven per cent a year on average, falling inflation and record foreign investment has won over many Turks fed up with mismanagement, corruption, fractious coalitions and four military coups in five decades.
The party also secured coveted EU accession talks in 2005 after 40 years of trying.
Erdogan has said he will leave politics if his party fails to win an absolute majority.