The Swiss People's Party (SVP) had aimed to better its 2007 score of 28.9 percent, but its split with the more moderate Conservative Democratic Party (BDP) since the last election is expected to have left it with seven fewer seats.
This time, it is projected to have polled just 25.9 percent, marking the first time in 20 years that it has recorded a drop in support.
"It's a defeat. We had a target of 30 percent," vice-chairman of the party Christoph Blocher told Swiss television.
"We cannot always win, win, win," he added, noting that new parties had chipped away his party's support.
In 2003, the party obtained 26.6 percent of votes cast. At the last elections that improved to 28.9 percent, the highest for any Swiss party since the introduction of the proportional representation system in 1919.
Opinion polls ahead of the vote had seen the SVP improving its score. In addition, the party's main campaign platform -- immigration -- was also forecast as the country's biggest concern. But the BDP has split its vote.
In addition, the Green Liberals also hurt the SVP, taking seats from the far-right party in some cantons on the back of concerns over the future of nuclear energy that surfaced after Japan's Fukushima accident.
The Green Liberals' rise also came at the expense of the more established Green Party, which is estimated to have lost seven seats.
"There are two losers -- the Greens, which did not benefit from Fukushima... and the second loser is the SVP," noted political analyst Gilbert Casasus.
Amid fears of an economic slowdown due to the European debt crisis, the SVP had sought to win votes through aggressive campaign claiming that the "mass immigration" of foreigners was taking away Swiss jobs, or that they were here to claim social benefits.
Its posters were ubiquitous in Swiss cities, depicting a crowd marching across the Swiss flag, with the slogan: "That's enough. Stop mass immigration."
However, signs that the SVP may have lost ground came shortly after polls closed, when its best-known figure Blocher, a billionaire industrialist and former justice minister, came in behind two incumbent senators.
With none of the three achieving an absolute majority, a run-off will be held in November.
Likewise, SVP's chairman Toni Brunner would also have to go to a second round to compete for a senate seat as he failed to secure an absolute majority in the St Gallen canton.
Historian Damir Skenderovic believed that the SVP may have "reached its peak in the previous elections."
Nevertheless, he noted that support for the far-right remains strong in the country, pointing out that two other far-right groups the MCG in Geneva and the Lega in Ticino had won seats.
Despite the dip in SVP votes, it remains the country's biggest party.
All the other major parties also lost ground in the election.
The Socialist Party are projected to have obtained the next biggest share of votes -- 18.1 percent.
The centre-right Free Democratic Party saw its share of votes fall to 15.3 percent, while the Christian Democrats are estimated to have polled 13.1 percent.