Merkel's Christian Democratic Party (CDU) and allies Christian Social Union (CSU) were set to garner around 28 percent, two separate polls by national broadcasters ARD and ZDF showed, sharply under their 35.3 percent in 2014.
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Her coalition partner SPD was also headed for its poorest showing in an EU poll with around 15.5 percent, as the centre-left party was knocked from second position by the Greens, which surged to between 20.5 and 22 percent.
The far-right AfD was set to improve on their 2014 score of 7.1 percent, with exit polls seeing it coming in at around 10.5 percent.
Meanwhile, broadcaster ARD predicted that the turnout for the elections in Germany was about 59 percent. In 2014 it was about 48 percent.
Exit polls showed the Greens had surged into second place behind the CDU/CSU.
Latest surveys have suggested that the climate crisis has overtaken immigration as the main worry.
Illustrating the shift, the Greens were forecast to be heading for an all-time high score which is double that of their 2014 showing.
"It's the first time that climate change has played such a role in an election," said Greens chief Robert Habeck.
They tweeted to say they thank you to everyone who had voted for them, while pictures emerged of party members celebrating the result.
Ska Keller, who was leading the Greens' list, pledged that "we must now implement (our proposals) on climate change".
Jörg Meuthen, AfD top candidate with supporters when the exit poll was announced. Photo: DPA
School strikes by students joining young Swedish activist Greta Thunberg's protests on Fridays have given momentum to the cause.
Accusing the Christian Democratic Union of not doing enough against global warming, the almost one hour long blistering attack has been viewed more than 11 million times by Sunday.
This graphic shows how the under 30s in Germany voted: overwhelmingly for the Greens.
The leadership of both Merkel's centre right and the SPD voiced disappointment at their scores.
CDU and CSU supporters in Berlin after the first exit polls. Photo: DPA
But both were at pains to stress that they are not about to break up the coalition.
CDU party general secretary Paul Ziemiak told ZDF the coalition "must go on so that there is stability in Germany," stressing that for his party, "it's about the country and not party political questions".
Separately, his counterpart at the SPD, Lars Klingbeil said the result "cannot remain without consequences".
But he said he "would advise against any personnel discussion", in what appeared to be a move at batting down rumours of a putsch being planned against party chief Andrea Nahles.