Jacinda Ardern, promising to lead "a government for all New Zealanders", will soon be sworn in as the next prime minister.
She'll be in charge of a coalition government with NZ First, and Winston Peters will almost certainly be her deputy.
Mr Peters announced on Thursday night his party had decided to join Labour, ending National's nine-year reign.
There will be four NZ First cabinet ministers and one under-secretary.
Labour and NZ First don't have enough seats for a majority so they need the Greens, who are supporting the coalition government on confidence votes.
The Greens, for the first time since they came to parliament 21 years ago, will have three ministers outside cabinet.
Ms Ardern, and National's leader Bill English, learned of NZ First's decision at the same time - when Mr Peters announced it at a Beehive press conference.
Mr English, the caretaker prime minister, called Ms Ardern to congratulate her.
He told reporters whether he remained leader of his party was something that would be discussed in the next few weeks.
National has more seats than any other party, and it's the first time a party in that position hasn't formed a government after an election.
Mr English said it would regroup and fight on.
"For a party that's going into opposition, we're in the best shape you've ever seen," he said.
Mr Peters said NZ First chose Labour because New Zealand needed change to face the future with confidence.
"The people want change, and it's going to happen," he said.
"The blunt reality is that far too many people are doing without."
Ms Ardern's first job will be to select her cabinet, which includes handing out positions to NZ First MPs and the Greens.
James Shaw, the Green Party leader, said his party was in a very good position outside the coalition.
He expected it would be in charge of the areas that most concerned it, and that the new government would get on with addressing climate change, restoring forests and rivers, and "having a real crack" at ending poverty in New Zealand.
Mr Peters has been offered the role of deputy prime minister, pushing aside Labour's deputy Kelvin Davis, but Ms Ardern said he was still considering whether to take up that offer.
Mr English addressed the media backed by his wife Mary, deputy leader Paula Bennett and senior colleagues Steven Joyce, Todd McClay, Gerry Brownlee and Nathan Guy.
"I'm naturally disappointed for the 44.5 per cent of people who voted for us, and the team," Mr English said, gracious in defeat.
He said Ms Ardern's rise to prime minister was "remarkable" and offered the advice not to take herself too seriously.
The party will hold a caucus meeting next week to discuss the way forward.
