The centre-right Christian Democrat party of Luxembourg Prime Minister Jean-Claude Juncker has won snap elections but has lost three seats.
His CSV party polled 33.7% of the votes, a fall of 5% since the last elections in 2009.
The CSV appeared to lose most ground to the third-placed Liberal DP opposition which gained four seats.
Mr Juncker's coalition collapsed in July amid claims he had failed to stop illegal security agency activities.
The prime minister has denied any wrongdoing.
Mr Juncker is the longest-serving elected leader in Europe, having headed the government since 1995.
Final results from Sunday's poll gave the CSV 33.68%, meaning 23 seats in the 60-seat parliament, down from 26.
The next two parties - each taking 13 seats - were Mr Juncker's socialist LSAP coalition partners with 20.28% of the vote and the Liberals (DP) 18.25%. The Greens took 6 seats.
"I am satisfied with the results as far as my party remains the number one party in Luxembourg, with a huge distance between my party and the two other main political parties," Mr Juncker said.
"We should be entitled to form the next government."
But he said it was too early to begin coalition talks.
DP President and Luxembourg City Mayor Xavier Bettel said the party was ready to take on responsibility: "There is one party of the main parties that is the big winner tonight and that is the Democratic Party."
Socialist supporter Lores Spene told the Associated Press: "We were expecting a bigger change but unfortunately not everybody was thinking like we do."
The coalition government of Mr Juncker's centre-right Christian Social People's Party and the Socialists unravelled in July.
It followed claims that he failed to stop illegal security agency activity such as phone-taps and corruption.
Critics at home also accused him of failing to focus on pressing domestic issues.
Earlier this year, the parliament reviewed a report alleging the allegations against the SREL security agency, which Mr Juncker oversees.
It included claims of illegal bugging of politicians, the purchase of cars for private use and payments in exchange for access to local officials.