The Eurosceptic, Russia-friendly FPO held a slim lead in opinion polls for months over Chancellor Karl Nehammer's ruling conservative Austrian People's Party (OVP) in a campaign dominated by immigration and worries about the economy.
Led by the 55-year-old Herbert Kickl, the FPO on Sunday won 28.8 per cent of the vote, ahead of the OVP on 26.3 per cent, and the centre-left Social Democrats (SPO) on 21.1 per cent, according to a projection based on nearly all the vote by pollster Foresight for broadcaster ORF, a slightly bigger victory margin than final polls had indicated.
Chancellor Karl Nehammer has rejected a coalition with the FPO if Herbert Kickl remains its leader. (AP PHOTO)
"We've made Austrian history because it's the first time the Freedom Party is Number 1 in a parliamentary election, and you have to think how far we've come," Kickl said after the party's record showing, which came seven decades after its foundation in the 1950s under the leadership of a former Nazi lawmaker.
The party has worked to moderate its image and broaden its appeal, but Kickl remains a provocative and polarising figure, roundly disliked by the other party leaders, who immediately united in rejecting the notion of forming a coalition with him.
If Kickl cannot persuade another party to ally with him, it could end the FPO's hopes of forming a government and open the door to a coalition of more moderate parties.
Only the OVP has offered any indication it could work with the FPO, but it has ruled out doing so with Kickl, who has given no hint he could step aside to let someone else take charge.
Seat projections suggested the OVP and SPO, which ruled Austria for decades together, could just muster a majority without a third party, which had long looked unlikely.
Kickl's win was hailed by hard-right parties across Europe, where the far-right has made gains in countries including the Netherlands, France and Germany. That growing support could stoke the risk of divisions inside the European Union over key policy areas like the defence of Ukraine against Russia.
Analysts said irrespective of whether Kickl captured the chancellery, Austria was now in uncharted territory.
"This is, of course, a big moment," said political analyst Thomas Hofer.
"This is a turning point in the Second Republic."
Kathrin Stainer-Haemmerle, a political science professor at the Carinthia University of Applied Sciences, said if Kickl did manage to become chancellor, Austria's role in the European Union would be "significantly different."
"Kickl has often said that (Hungarian Prime Minister) Viktor Orban is a role model for him and he will stand by him."
Kickl, who this year forged an alliance with Orban, opposes providing aid to Ukraine and wants sanctions against Russia withdrawn, arguing they hurt Austria more than Moscow.
On Sunday, Kickl said he was ready to talk with all parties over forming a coalition, and President Alexander Van der Bellen, who oversees the formation of governments, urged parties to find common ground in negotiations in the coming weeks.
