Viktor Orban’s centre-right Fidesz has polled 45%, with most of the votes counted.
A centre-left opposition alliance is trailing with 25%, while the far-right Jobbik party is credited with 21%.
The Hungarian left has never fully recovered from its heavy defeat in the 2010 ballot, in which Viktor Orban swept to power with a two-thirds majority.
Sunday’s election has been mainly fought over the state of the economy, correspondents say.
“No doubt we have won,” Viktor Orban told supporters gathered in the capital, Budapest, late on Sunday evening.
“This was not just any odd victory. We have scored such a comprehensive victory, the significance of which we cannot yet fully grasp tonight.”
Viktor Orban said the election results showed that Hungarians wanted to stay in the EU, but with a strong national government.
“I’m going to work every day so that Hungary will be a wonderful place,” he declared.
Fidesz is predicted to win around 135 of the 199 seats in parliament.
It now also seems likely that Jobbik will become the second-largest party in parliament.
Although the Socialist-led opposition is in second place, the five parties making up the alliance plan to form their own factions after the elections.
Observers say Jobbik’s adoption of a softer image has paid dividends, as a recent opinion poll found leader Gabor Vona to be the most popular opposition politician.
Fidesz supporters say Viktor Orban’s victory is a tribute to his leadership powers. But opposition parties have accused the prime minister throughout their campaign of undermining Hungarian democracy.
They have also accused Viktor Orban of curtailing civil liberties and harming free speech.
Fidesz has insisted that reform was needed to complete the work of eradicating the legacy of Communism from the country, and reduce the budget deficit to below the EU’s required 3% of gross domestic product.
Viktor Orban’s populist and Eurosceptic approach has proven popular with many Hungarians.
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