The Conservative party of Stephen Harper, the prime minister, has won a second term in government, but fallen short of securing an majority, according to local television projections.
Television networks on Tuesday projected that Conservatives candidates had been elected or were leading in 145 districts, at least 155 seats are needed for a majority in the 308-seat House of Commons.
Al Jazeera, reporting from the capital, Ottawa, said Harper's gamble to call early elections in order to gain a majority, had failed.
Harper had tried to campaign as a good economic steward but external events, including the crash on Wall Street last week, put Harper back where he started, leading a minority government, our correspondent explained.
That means they will still need opposition party support to govern as they have in the past two and a half years.
Early vote counts published on the website of Canada's election agency showed the Liberals in second place with 75 seats, while the Quebec-based Bloc Quebecois had 50 and the New Democrats 38 seats.
The Conservatives sought to put a good face on the results, which did at least increase their presence in the lower house of parliament.
"Every other incumbent government in the Western world is in serious political trouble with the economic situation," Jason Kenney, a Conservative MP, said.
"Ours is probably the only one that could be re-elected, let alone with an increased mandate."
Harper was the first Western leader to contest an election since the global financial meltdown and a Conservative majority had looked within reach at times during the campaign.
But besides questions on the economy, Harper lost major support in Quebec over cuts to arts funding and plans to give adult sentences to violent youth criminals.
When it emerged during the campaign that another minority government was the most likely result, Harper faced criticism for having called the election in the first place at a cost of about C$300m ($260m) to taxpayers.
But he said that even if he only got a second minority, he would be in a stronger position than he had been two and a half years into the minority mandate he won in the 2006 election, since opposition parties would be less likely to topple him for now.
The Liberals, who have historically governed Canada for longer than any other party, looked set for their worst performance since 1984.
The defeat could trigger a battle to replace Stephane Dion, the party leader, who found it hard to sell a carbon tax plan at a time of high energy prices.