Merkel's Christian Democrats (CDU) and their Bavarian sister party the CSU – a team that last September celebrated a landslide win at the national level – between them secured 35.3 percent of votes cast.
The neo-Nazi National Democratic Party of Germany (NPD), won 300,000 votes, one percent of the total, and so wins its first seat in the 751-member European parliament.
The far-right party profited from a reform of Germany's electoral system, which removed a three percent threshold to gain seats.
And the removal of the three-percent hurdle also meant that the Animal Protection Party and a spoof party called Die Partei are set to win a seat each.
Die Partei’s leader Martin Sonneborn said: "I will spend the next four weeks in intensive preparation for my resignation."
The former editor of satirical magazine Titanic said his party follow a rotation principle. "We will try to resign once a month, so that we can smuggle 60 party members through the EU Parliament," he said. "So we'll be milking the EU like a small, southern European country."
The CDU-CSU result – though less triumphant than last year's 41.5 percent German election win, mainly because of CSU losses – was seen as another endorsement for Merkel, the only leader of a major EU member country to have weathered the fallout from the eurozone crisis.
Germany, the EU's most populous country, sends 96 members to the European legislature, which has demanded a bigger say in who takes over from outgoing European Commission president Jose Manuel Barroso.
Strong gain for centre-left SPD
Gabriel also praised the turnout of over 48 percent: "The people knew what this was about, and that's why they went out to vote: they wanted to decide for themselves who will be the next president of the European Commission."
The Green party took third place with 10.7 percent, followed by the far-left Die Linke with 7.4 percent. The pro-business Free Democrats, once Merkel's governing allies, remained in the doldrums at 3.4 percent.
See how the night unfolded in our live election blog.