Zoran Lucic, an official of the independent monitoring group, said "we can conclude that there will be a run-off" and added that it would be "extremely tight".
Analysts said the record 61 per cent turnout reflected a widespread fear among liberal Serbs that a Nikolic win would stall reform and complicate Serbia's path to the European Union.
"Nikolic and Tadic have different policies regarding Europe, therefore the runoff will actually be a popular referendum on whether the country wants to join the European Union or not," Vuk Jeremic, Serbia's foreign minister and a member of Tadic's Democratic Party, said.
To win the February 3 run-off, the two candidates will have to attract third party votes with promises to increase living standards and employment within months.
Tadic and Nikolic will also be assessed on their promises to prevent the secession of the province of Kosovo, which is heading for independence.
Indications by Washington and most EU member states that they will recognise Kosovo - Serbia's historic heartland – as independent within months have irked Serbs who feel the country has paid enough for its role in the wars of the 1990s.
|Tadic advocates Serbia's integration|
into the European Union [AFP]
Nikolic has played on that growing frustration and taken a hard line against Kosovo independence.
Nikolic's Radical party supported the policies of Slobodan Milosevic, the Yugoslav president who died while being tried at The Hague for war crimes, during the 1990s.
But he rejects accusations of isolationism and war-mongering and has toned down his rhetoric to appeal to moderates as well as the one third of Serbs who live just above the poverty line.
Tadic also opposes independence for Kosovo but favours signing a first-level agreement with the EU even if the bloc takes over Kosovo's supervision as a prelude to recognising the territory.
He advocates integration into the European Union while Nikolic believes that Serbia should remain close to Russia, which has backed it over Kosovo, and says "we need the EU, but not at any price".
Tadic also lost the first round to Nikolic in 2004 but defeated him in the run-off.
He has warned that a Nikolic victory would drive the country back to the Milosevic days.
In the Kosovo capital, Pristina, on Sunday, five people were injured in an explosion in close to an area popular among Western diplomats in the Dragodan district.
Agron Borovci, a police spokesman, said they were investigating the blast, as well as a shooting that was reported in the same area.
He brushed off fears that the explosion could be politically-motivated.