Ex-PM Silvio Berlusconi's right-wing coalition looks set to win the most seats in the lower house of parliament.
It is tipped to get 248-268 seats - below the 316 needed for a majority.
Forming a government may now take weeks of negotiation and coalition-building.
Alternatively, fresh elections could be held in a bid to produce a more decisive result - though there is no guarantee that would happen.
What does the result mean?
Italian daily newspaper Il Fatto Quotidiano is running a front-page headline saying simply: "Everything will change."
Though no party will be able to rule alone based on the early poll figures, the surge of support for populist outfits has been compared with Brexit and the election of Donald Trump in the US.
Vote projection figures put the Eurosceptic, anti-establishment Five Star Movement in second place, after the centre-right coalition.
Founded in 2009 by comedian Beppe Grillo, who denounced cronyism in Italian politics, Five Star made significant gains and could emerge as the largest single party in Italy's lower house, with 216-236 seats.
Public anger over unemployment and immigration appears to have battered the ruling Democratic Party of former Prime Minister Matteo Renzi. Its centre-left coalition is projected to come a distant third, with an estimated 107-127 seats.
"It is clear to us that this is a blatant and clear defeat," said Agriculture Minister Maurizio Martina.
Final confirmed results are not expected for several hours.
BBC Europe editor Katya Adler tweeted that it is "theoretically possible for the EU's nightmare result to come true: a coalition between the 'populist Eurosceptics': Five Star and Lega [the League party]".
Voting for Italy's Senate, the upper house of parliament, also favoured populists and parties of the right. Five Star performed better than anticipated, with figures based on early vote counting suggesting it will take the most seats - around 102-122, but miss out on a majority.
The right-wing coalition is predicted to get 118-150 seats in the upper house, and the Democratic Party 42-54.
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