Sweden's left-of-centre Prime Minister Stefan Lofven says he will call snap elections after his minority government lost a budget vote less than three months after coming to power.
He said a new poll would take place on 22 March.
The government failed to push its budget through parliament, when the far-right Sweden Democrats sided with the opposition.
The Sweden Democrats emerged as a power broker after September's elections.
The party now holds 49 seats and, voting with the centre-right opposition on Wednesday, defeated the government's budget by a margin of 182 to 153.
At a hastily called news conference after the vote, Mr Lofven told reporters that new elections would enable voters to "make a choice in the face of this new political landscape".
Under the constitution he cannot officially call a national poll until 29 December.
Accusing the centre-right parties of failing to engage constructively over the budget, Mr Lofven complained that the opposition had allowed the far right to dictate terms.
"We have formed a government, we have a budget, and we will go into the elections with that," he said, standing alongside a spokesman from his coalition partner, the Greens.
The Sweden Democrats became the country's third largest party, with 13% of the vote, and is demanding a reversal in Sweden's liberal immigration laws, which party spokesman Mattias Karlsson has condemned as an "extreme immigration policy".
Sweden has offered permanent residence to all Syrians fleeing the conflict and has the highest rate of asylum applications per capita of any EU country.
Sweden's Migration Board said this year that as many as 2,000 people were applying every week. Most were from Syria, although there had also been an increase from Eritrea.
Asylum applications to Sweden
2014: 83,000 (projected)
2015: 95,000 (projected)
Mr Lofven's Social Democrats formed a minority government with the Greens but between them they have only 138 seats in the 349-seat parliament.
Mr Lofven spent hours late on Tuesday trying to reach a budget deal with the centre-right opposition but the talks fell apart without a compromise.