Despite overseeing a modest economic recovery, the ruling center-left coalition trailed a distant third on 22 percent, hit by widespread anger over persistent poverty, high unemployment and an influx of more than 600,000 migrants over the past four years.
But the governing Democratic Party- headed by former prime minister Matteo Renzi - had a bad night, with exit polls suggesting it won less than 20% of the vote.
In an upset, the partial results showed the right-wing, anti-immigrant and euroskeptic League party of Matteo Salvini surpassing its coalition partner, the establishment Forza Italia party of ex-Premier Silvio Berlusconi.
The centre-right coalition now dominating includes a smaller far-right party, with 33% to 36% percent of the vote, compared with the anti-establishment 5-Star Movement's 29.5% to 32.5%.
An exit poll on Sky Italia television showed the League on 14.5 percent in the lower house, with Forza Italia on 14 percent.
But if, as expected, no-one clinches a clearcut victory on Sunday, it might take weeks before a government deal is reached.
The turnout figures are in line with the constitutional reform referendum in December 2016, when overall 65.5 percent of the nation voted. "We feel the responsibility to give this country a government,"' he said.
Final results will not be available until earlier on Monday March 5.
Heavily indebted Italy is the third largest economy in the 19-member euro zone.
If projections are accurate, the result means that Italy could be plunged into months of further political deadlock that could have broader implications for Europe - both the League and the Five Star Movement are anti-EU parties.
Italians are voting after a divisive campaign dominated by concerns over immigration and the economy.
Chancellor Angela Merkel's party remained the biggest force in the German Parliament despite the rise of the anti-immigrant AfD. The incident fueled serious political debate about how the country is reconciling its fascist past.
But the biggest victor on Sunday was the 5-Star Movement, which was predicted to have won a third of all votes cast, up from 25 percent last time around, putting it in the driving seat in any future coalition talks.
The populist parties' gains in the polls were not lost on US President Donald Trump's former strategic adviser Steve Bannon, who was in Rome to observe the elections.
European populists say populists in Italy will be further enabled and strengthened, if Sunday's election upheaval does turn into much ado about nothing, as it will just build up more frustration that they willbe able to feed off.
On the campaign trail, he vowed to "defeat the friends of (Viktor) Orban, the AfD and (Marine) Le Pen", referring to the League's far-right allies in Hungary, Germany and France.
"The European Union is going to have a terrible evening", she said in the post.