The AK Party, founded by President Tayyip Erdogan, won close to 50 percent of the snap vote according to unofficial results, following widespread violence in the mainly Kurdish southeast and a crackdown on media critical of the government.
The heads of the joint mission from the Council of Europe and the Organization for Security and Co-operation in Europe (OSCE) said at a news conference the violence had a significant impact.
They pointed to attacks and intimidation against members of the pro-Kurdish HDP, which saw its support drop 2 percent compared with June polls.
"Unfortunately we come to the conclusion that this campaign was unfair, and was characterised by too much violence and fear," said Andreas Gross, a Swiss parliamentarian and head of the Parliamentary Assembly of the Council of Europe delegation.
Observers praised the high voter turnout but criticised what they said was biased coverage by the national broadcaster, TRT, and a deteriorating environment for journalists.
"It is ... vital that the President works towards a more inclusive process ... he has to unite again what has been divided in the last five months," Gross added.
So far no parties have lodged formal complaints over the results, although the HDP said it was planning to contest several seats. Official results are not expected for another 11 days, in order to allow time for complaints to be assessed.
The AKP lost its majority in June polls. Voters this time appeared to choose stability after months of political uncertainty, a surge in violence between the army and Kurdish militants and two bombings linked to Islamic State which killed more than 130 people.
Erdogan had urged voters to restore the country to single-party rule to maintain security. His critics accused him of deliberately creating chaos to frighten disaffected supporters.
Turkey's relations with the EU have soured in recent years amid accusations that human rights have been eroded under Erdogan.
World must respect Turkish election result: Erdogan
A jubilant President Tayyip Erdogan on Monday cast the return of Turkey to single-party rule as a vote for stability that the world must respect, but opponents fear it heralds growing authoritarianism and deeper polarisation.
It was a personal triumph for the combative leader, who despite being constitutionally above party politics as head of state had shaped the AKP's executive committee and its parliamentary candidates in the run-up to the vote.
The result handed the AKP 317 of the 550 seats in parliament, only 13 short of the number Erdogan would need for a national referendum on constitutional changes he wants to forge a presidential system granting him full executive powers.
"The national will manifested itself on Nov. 1 in favour of stability," Erdogan said in comments to reporters after praying at a mosque in Istanbul.
"Let's be as one, be brothers and all be Turkey together."
The vote came at a critical time for Turkey on the global stage, with the United States dependent on Turkish air bases in the fight against Islamic State in Syria, and the European Union desperate for Turkish help with its growing migration crisis.
Erdogan's victory, two weeks ahead of a G20 leaders' summit in Turkey, leaves Western allies dealing with an emboldened leader they may already know, but whose cooperation has not always been easy to secure.
Financial markets rallied, with the lira currency on track for its biggest one-day gain in seven years and stocks up 5 percent, relieved that uncertainty from an election cycle stretching back almost two years had finally ended.
But the result left the 50 percent of Turks who did not vote AKP in shock: from liberal secularists suspicious of Erdogan's Islamist ideals to left-leaning Kurds who blame the government for resurgent violence in the largely Kurdish southeast.
Since nationwide anti-government protests and a corruption scandal around Erdogan's inner circle in 2013, his opponents had lived in the hope that the power of modern Turkey's most divisive leader was finally on the wane.
"Back to Square One" said the headline on Today's Zaman, a newspaper critical of the AKP, casting the outcome as a result of a divisive and fiercely nationalist campaign.
Washington said it was deeply concerned that media outlets and journalists were subject to pressure during the campaign.
Amid reports that journalists were pressured in order to weaken political opposition, spokesman Josh Earnest said the White House had urged Turkish authorities to uphold the values of its constitution.
German Chancellor Angela Merkel called Turkish Prime Minister Ahmet Davutoglu to congratulate him on his election victory and urged swift joint action to deal with the migrant crisis.
