She says among other things that she needs to work harder to explain her migrant policies.
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The Christian Democratic Union (CDU) finished second, with just 17.6 percent of the vote.
“Berlin continues to stand for social and human decency”, Sigmar Gabriel, the German vice-chancellor and leader of Merkel’s coalition partner, the centre-left Social Democrats (SPD) said.
The Berlin result marks the second recent defeat for Merkel since Germany adopted its open-door refugee policy.
CDU and SPD remained the two leading parties, but the coalition may be threatened by the loss of votes.
Initial projections from ZDF put Ms Merkel’s CDU on 18%, down from 23.3% in the last election in 2011. Founded in 2013 as a Eurosceptic party, it did not compete in the previous election and will enter the Berlin state parliament with approximately 25 seats.
However, it was largely local issues that drove the vote in the city of 3.5 million.
Speaking in unusually self-critical terms, Merkel edged away from her oft-repeated mantra – first uttered during the height of the migrants crisis previous year – that “we will manage”.
She has also decided against repeating her much-derided phrase “we can manage it”, which she first used over year ago just as the influx of refugees was beginning to grow.
“If I could, I would take the time to rewind many years so as to better prepare myself and the government and all those in responsible positions for the situation in late summer 2015 that took us rather by surprise”, said Merkel.
Merkel, whose government has allowed more than one million people seeking asylum into the country, faces voters in national elections next September.
“I’m the party chairwoman, and I’m not going to duck responsibility”, Merkel said.
Henkel, who has been in charge of security matters in Berlin for the past five years, added it was wrong to think there had been no improvement over the past year.
The leader of Germany’s far-right Alternative for Germany (AfD) party saw her auto torched in Leipzig on Friday evening.
The Left, which traces its roots partly to the former East German communists, was the victor among established parties, rising about four percentage points to nearly 16 percent to take third place. The right-wing AFD has secured another strong election result.
The anti-immigrant, Euro-skeptic party known as AfD has been plagued by controversies over anti-Semitism in its ranks.
“They’re a single-issue party” focused on the refugee crisis, said McAllister, the former Lower Saxony prime minister.
Nonetheless, the vote marked another milestone for the upstart AfD, which has campaigned on a xenophobic platform – similar to France’s National Front and far-right populists in Austria and the Netherlands – and gained support especially in Berlin’s poor eastern districts.
Voters appear to have punished German Chancellor Merkel for allowing some 1.1 million migrants fleeing war and poverty to be registered in Germany, after several other European Union countries such as Hungary showed open hostility towards them.
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“We have achieved a great result”, Beatrix von Storch, one of the AfD’s leaders, said. “But its foundations won’t be shaken”.
