The CDU has slumped to its lowest level since 1990 following a Berlin state vote that openly rejected Ms Merkel's open-door policy for refugees.
The result of Berlin's state election has raised more doubts about whether Europe's most powerful leader will stand for a fourth term.
German Chancellor Angela Merkel's Christian Democratic Party suffered a 5.6 per cent drop - its worst performance in the capital since Germany's reunification.
And its regional coalition partner, the Social Democrats, have also taken a hit - meaning their alliance appears to be over.
The assessment by CDU candidate Frank Henkel was blunt.
"The voters have taught the grand coalition a significant lesson. Both parties have clearly lost compared to 2011. You don't have to beat around the bush. For us, the CDU, this result is absolutely unsatisfactory."
Other Christian Democrats, like Christoph Brzezinski, are worried.
"Of course the CDU didn't succeed in bringing their content across in a way that more than 18 per cent would have voted for us. We surely have to talk about why this didn't work out."
Since no party won an outright majority the Social Democrats will form a new coalition government.
It's largely expected to do so with the Left Party, which came third in the vote, and the Greens.
But it's vowed not to work with the populist Alternative for Germany party, the AFD, which played heavily to voters' fears about Ms Merkel's open-door migration policy.
Around one million people fleeing Middle East war zones entered Germany last year, raising concerns about their financial and social impact.
During his campaign, Berlin Mayor and Social Democrat Michael Mueller compared a strong AFD result to a resurgence of Nazism in Germany.
"I've been asked how we're going to deal with them, sitting in the state assembly with a double-digit result. And I have said there is no change to our current position. There will not be any kind of cooperation with the AFD on a regional or state level."
But by securing nearly 14 per cent of the vote the AFD has easily entered its 10th regional assembly of the country's 16 states.
The party's State chairman, Georg Pazderski, is now setting his sights on next year's federal election.
"My dear friends, what we've achieved tonight is unique for Berlin. From zero to double-digits, that's unique for Berlin. It didn't happen here for 66 years. The grand coalition has been voted out - not yet at the federal level, but that will happen next year."
The result comes two weeks after the AFD finished ahead of the CDU in another state vote.
The discontent once thought to be limited to rural areas is now appearing in a city previously known for its openness to multiculturalism.
