While short of an overall majority, the AfD won 44 per cent of the vote on Sunday, delivering a drubbing to Chancellor Friedrich Merz's conservatives, reflecting the deep unpopularity of Germany's ruling coalition.
The AfD is Germany's most popular party at the national level and is seeking to secure a foothold for advancing its agenda, which includes heavy restrictions on immigration, restoring ties with Russia, cutting support to Ukraine and quitting the euro.
It remained unclear whether the AfD could form a government but the wider political significance was clear for the election.
"We have made history in this country," said Ulrich Siegmund, the 35-year-old AfD lead candidate in Saxony-Anhalt, who attracted thousands to his campaign rallies and who repeatedly cast victory in the state as a first step towards securing national power in federal elections due in 2029.
"The people have made it absolutely clear that they finally want political change and, above all, they have shown that they want it with us," Siegmund said.
US President Donald Trump posted a screenshot of the result without comment on his Truth Social site, while far-right leaders in other European countries cheered the election as a mandate for change.
The result marks a significant setback for Merz, whose personal approval rating has sunk to historic lows as voters turn away from both his planned reforms to revive Germany's sluggish economy.
A poll from the ARD broadcaster showed 87 per cent of the state's voters were unhappy with the federal government.
Merz has vowed to revive Europe's largest economy with business-friendly reforms and increased spending, while warning that an AfD win in Saxony-Anhalt would damage the state and deter foreign companies from investing there.
Germany's mainstream parties have all refused to work with the AfD, which has been classified as right-wing extremist by the local office of Germany's domestic intelligence service.
One outlier is the small Sahra Wagenknecht Alliance party (BSW), which looked set to clear the threshold to enter parliament. The BSW has floated the idea of rule for Saxony-Anhalt by a non-partisan state premier relying on shifting majorities, including with votes from the AfD.
Siegmund, however, rejected the BSW's idea as a "mess" and ruled out any arrangements with other parties that would prevent the AfD from delivering on his promise of change.
"If push comes to shove, there will simply be new elections," he said.
Merz's conservatives said they would explore talks with other parties, although that could require pulling together parties with vastly different policy agendas.
Although Saxony-Anhalt, formerly part of Communist-run East Germany, is one of the smaller German states, with a population of just over two million, the result underlines the rapid advance of the AfD since it was created in 2013.
The AfD is now Germany's most popular party nationally, polling at 28 per cent according to a recent INSA poll, comfortably ahead of the conservatives on 20 per cent.
While hard-right parties have gained ground elsewhere in Europe, Germany's Nazi past has contributed to a reluctance among mainstream parties to co-operate with the AfD.
The AfD has dismissed accusations of extremism as scaremongering and an insult to the party's millions of supporters.
During the campaign, the AfD tapped into growing disillusionment with established parties, which it characterises as tired and out of touch, offering instead a range of hardline policies and a nostalgic vision of a return to cleaner and safer streets and taking pride in being German.
The AfD's program includes plans to push schools and cultural institutions towards what it views as more traditional values, while curbing immigration and overhauling public broadcasting. It wants the children of refugees to be taught in segregated classes.
with Reuters and AP
