Angela Merkel, Germany's chancellor, is to seek a coalition deal with the pro-business Free Democrats (FDP) within a month, after her ruling Christian Democratic Union (CDU) won Sunday's general election.
The result should allow the CDU to end their awkward four-year-old partnership with the left-wing Social Democrats (SPD) and establish a new government with the FDP.
The two centre-right parties need to hammer out agreements on a range of issues, including tax, labour market policy and the role of nuclear energy in Europe's biggest economy.
Ronald Pofalla, general secretary of the CDU, said: "Coalition talks should start as soon as possible ... and it is our goal to have a coalition deal in a month at the latest."
Addressing cheering supporters of her party in Berlin on Sunday, a beaming Merkel said: "We have achieved something great. We have achieved our aim of gaining a stable majority for a new government."
"Tonight we can really celebrate," she said, but warned that "there are many problems in our country to be solved".
The CDU and its Bavaria-only sister, the Christian Social Union, won 33.8 per cent of the vote, while the Social Democrats took 23 per cent.
The Free Democrats captured 14.6 per cent, with the Left Party taking 11.9 per cent and the Greens 10.7 per cent.
That gave the conservatives 239 seats and the Free Democrats 93 in the lower house, for a comfortable centre-right majority of 332 seats to 290.
The Social Democrats won 146, the Left Party 76 and the Greens 68.
It was the SPD's worst parliamentary election result since the second world and a significant shift from the 2005 election, in which Merkel's conservatives just edged past their rivals.
Frank-Walter Steinmeier, the SPD's leader, said the result was "a bitter defeat" but vowed to lead a strong opposition.
Thomas Kielinger, a correspondent for the German daily newspaper Die Welt, said that the end of the "grand coalition" would be a good thing for German democracy.
"Political life will now become far more interesting in the next four years than it has been in the last four," he told Al Jazeera.
"We'll have a proper opposition now ... and we'll have a bit of a tug-of-war inside the coalition where the Free Democrats - more pro-market than Mrs Merkel's party - will want to pull her more into capitalist, pro-business stance which will give her pause and might make her unpopular with large sections of German society."
Voter turnout on Sunday was a post-war low of 70.8 per cent, down from 77.7 per cent four years ago.
Al Jazeera's Barnaby Phillips, reporting from Germany, said the low turnout partly reflected the fact that it was not the most passionate of campaigns, that enough Germans felt relatively pleased with the direction their country was going in and that it was hard to discern dramatic policy differences between the parties during the campaign.
The vote took place against a backdrop of heightened security after al-Qaeda issued several videos last week threatening to punish Germany if voters backed a government that kept German troops in Afghanistan.
In foreign policy, a centre-right coalition could be more vocal in trying to block Turkey's bid to join the European Union.
Merkel favours a "privileged partnership" for Ankara that stops short of full membership.
But foreign policy issues were not top of voters' lists going into the election, with the vote coming at a crucial time domestically for Europe's largest economy, just now emerging from its deepest recession of the post-war era.
The next government will have to get a surging budget deficit under control and cope with rising unemployment and the threat of a credit crunch as Germany's fragile banks pull back their lending.