This is the moment supporters of the far-right AfD party heard the outcome of the first exit polls in the German election.
Merkel basked in her win but admitted that she had fallen far short of the 40-percent goal her party set. It helped the four-year-old party siphon off many conservative Merkel supporters as well as voters in the former communist eastern Germany, where unemployment tends to be higher and incomes lower than the German average.
"Merkel has become a very polarizing figure, something she never envisioned for herself, never saw happening", said Merkel biographer Stefan Kornelius, who is also foreign editor of Germany's daily Suedeutsche Zeitung.
Chancellor Angela Merkel after she cast her vote in Berlin for in the Germany elections.
The party's entry into the national parliament heralds the beginning of a new era in German politics that will see more robust debate and a departure from the steady, consensus-based approach that has marked the post-war period.
The Alternative für Deutschland (AfD) was celebrating its historic third place success on Sunday night, having secured 13% of the vote, according to exit polls, marking the first time in nearly six decades that an openly nationalist party will enter the Bundestag. "We are entering the Bundestag for the first time and we will change this country".
The caucus leader of Merkel's Union bloc, Volker Kauder, said he "would have liked a better result" but voters had given the party the task of forming the next government. Merkel's bloc dropped some nine percentage points from the last election in 2013 to record its worst result since 1949.
"We have a mandate to form a new government, and no government can be formed against us", Merkel added.
After the AfD hurt her conservatives in regional elections previous year, Merkel, a pastor's daughter who grew up in Communist East Germany, wondered if she should run for re-election.
German envoy: AfD will not change status quo
AfD co-leader Alexander Gauland vowed that "we will take our country back" and promised to "chase" Merkel. Some supporters chanted "AfD!"
If the SPD sticks to its refusal to play ball, mathematically the most likely scenario would be a link-up with the pro-business Free Democrats, who staged a comeback after crashing out of parliament four years ago, and the left-leaning Greens.
Whatever the make-up of her coalition, Merkel, 63, faces four years of government in a fragmented parliament after the return of the FDP - unrepresented at national level for the last four years - and the arrival of the AfD.
"This is a hard and bitter day for German social democracy", a grim-faced Schulz, a former European Parliament chief, told reporters, adding that he hoped to remain party leader.
In the runup to the election, NPR's Soraya Sarhaddi Nelson reports German voters were inundated with campaign posters, including ones from the anti-Muslim AfD party with the blunt slogan: "Burkas?"
Without the SPD, Merkel's only straightforward path to a majority in parliament would be a three-way tie-up with the liberal Free Democrats (FDP) and the Greens, known as a " Jamaica" coalition because the black, yellow and green colours of the three parties match the Jamaican flag.
"We want to win back AfD voters by solving problems, by taking account of their concerns and fears, and above all with good policies", Merkel added.
Schulz's defeat to Merkel means the Social Democrats haven't won an election since 2002, and raises a question mark over his fate as leader.
The Left Party is incompatible with the conservatives and all others have voted not to work with AfD.