Kurz's People's Party (OeVP) won 30.5 percent of the vote, followed by Chancellor Christian Kern's Social Democrats (SPOe) on 27.1 percent and the far-right Freedom Party (FPOe) on 25.9 percent, projections showed.
Kurz, 31, nicknamed "wunderwuzzi", ("whizzkid") took over the OeVP in May and managed to attract supporters in droves by depicting himself as a breath of fresh air, talking tough on immigration and vowing to slash taxes and red tape.
"I promise I will fight for great change in this country. It's time to establish a new political style and a new culture in this country," Kurz said yesterday.
But to form a government Kurz will have to enter a coalition with one of the other parties.
The most likely partner is seen as the populist FPOe of Heinz-Christian Strache, 48, although this is far from guaranteed.
"We are waiting for the final result," OeVP general secretary Elisabeth Koestinger said.
"We will form a coalition for the next five years with the party that can enable us to achieve and change the most in this country."
Another option for Kurz would be a new "grand coalition" with the SPOe, but after 10 acrimonious years governing together, ended early by Kurz in May, this is seen as less likely.
An even more remote possibility in the wealthy EU member of 8.75 million people is a tie-up between the FPOe and the SPOe Social Democrats, whose campaign suffered a string of mishaps.
"We want to assume responsibility. This can be in many different forms," PPOe leader Kern said.
"We've experienced a massive swing to the right. We're not enthused but we can live with the result."
Stolen thunder
In December, the FPOe almost won the presidency and topped opinion polls in the midst of Europe's migrant crisis.
But since taking over the OeVP in May and re-branding it as his personal "movement", Kurz has stolen some of Strache's thunder.
As foreign minister, the rosy-cheeked Kurz claims credit for closing the Balkan migrant trail in 2016 that saw hundreds of thousands of migrants trek into western Europe.
Pushing far-right themes, he wants to cut benefits for all foreigners, reduce bureaucracy and stop the EU having too much say in national affairs, in common with Strache.
Leader of the right-wing Austrian Freedom Party (FPOe) Heinz-Christian Strache celebrates at the party headquarters Source: AAP
The last time the FPOe entered government, in 2000 under controversial then-leader Joerg Haider, who praised Hitler's "orderly" employment policies, Austria was ostracised in Europe.
But there would not be the same backlash now owing to the "normalisation of the far-right in Europe since then," said expert Pepijn Bergsen at the Economist Intelligence Unit.
"The FPOe is a different party. Its campaign was moderate in tone," finance student Marcus Kronberg, 23, told AFP at the OeVP's election party.
"There was nothing to be ashamed of as an Austrian. I have no problems with (a FPOe coalition) and I hope Brussels will see things the same way."
EU headache
But the FPOe in government would still pose a fresh headache for Brussels as it struggles with Brexit and the rise of nationalists in Germany, Hungary, Poland and elsewhere.
Like Alternative for Germany, which last month became the third-largest party in the Bundestag, and France's National Front, the FPOe has stoked concerns about a record influx of migrants into Austria and Europe.
The party was founded by ex-Nazis in the 1950a, Strache flirted with neo-Nazism in his youth, and is ambivalent at best about the EU.
The FPOe has an alliance with President Vladimir Putin's United Russia party and wants EU sanctions on Moscow lifted.
Vienna will hold the EU's presidency in the second half of 2018, just when Brussels wants to conclude Brexit talks.
"The Freedom Party as a government partner will not make a good impression in Europe (and) Kurz is aware of that," commented Der Standard newspaper.
"But the question is whether there is any getting around Strache."
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