Merz needed a majority of 316 out of 630 votes in a closed ballot, but ultimately only got 310.
That a nominated chancellor fails in the first round of voting – after successful coalition talks – has never happened before in German history.
The result is shocking to many, as Tuesday's ballot was generally seen as a formality. Merz is relying on a coalition consisting of the Christian Democratic CDU/CSU and the Social Democratic SPD, which together have 328 seats in the Bundestag and thus enough to win the ballot.
The parties' MPs were said to be fully present before the ballot.
"Thunderclap"
"Someone wants to see the republic burn", writes Volker Beck, former member of parliament for the Green party, on X.
The Greens' Renate Künast believes that the ballot has significantly weakened Friedrich Merz's position. It is "a thunderclap for the whole country", says Künast to the TV channel Phoenix.
The nationalist Alternative for Germany (AFD) – which became the second-largest party in the election in February – thinks this is a "good day for Germany".
Merz should step aside and pave the way for a new election, says Alice Weidel, one of AFD's two party leaders, to reporters.
Now the parliamentary groups will gather to discuss the next step. It's not over for Merz to become Chancellor. To be elected, 316 votes are required – but with an unlimited number of rounds of voting.
Can be elected as early as tonight
The parliament has 14 days to choose a candidate with an absolute majority. If that also fails, the election can be held with a relative majority, i.e. the most votes win. If that doesn't work, the president can dissolve the Bundestag and call a new election.
It's not clear when the next ballot will take place, but CDU leader Carsten Linnemann hopes it will be already on Tuesday.
I hope we go into the second round of voting today, he says to the TV channel Phoenix, adding:
I hope we get a chancellor tonight.
The CDU/CSU became the largest in the country's new election in February with 6 percent of the votes. However, they were not large enough to get their own majority and were forced into coalition talks.
