New Zealand is set for a centre-left coalition government led by Labour head Jacinda Ardern.
Ms Ardern has been opposition leader for the last three months. At 37, she is set to be the country's youngest prime minister since 1856.
Her Labour Party came second in September's election, where no party was able to secure a majority.
They are now tipped for power after the small New Zealand First party agreed to join them in government.
The new coalition will also be supported by the Green Party.
New Zealand First head Winston Peters on Thursday announced his party's decision to ally itself with Labour.
His party holds the balance of power with nine seats, while the Labour-Green bloc has 54 seats and the National Party 56 seats.
He said his party was faced with a decision between "modified status quo or change" and decided to go for change.
The campaign ahead of the September general election had seen a tightly contested race between incumbent Bill English, from the National Party, and rising political star Jacinda Ardern.
The strong Labour support, dubbed "Jacinda-mania", brought the party neck and neck with the National Party, though supported dropped slightly in the last days of the campaign.
Ms Ardern had targeted young New Zealanders with policies on education subsidies, housing and the environment.
Bill English became prime minister in 2016 when his predecessor John Key unexpectedly resigned.
He had promised voters experience and reliable economic management.