Portugal's governing Socialist Party admitted defeat in a general election on Sunday.
Exit polls on Sunday gave the PSD between 37% to 42.5% of the vote, ahead of the Socialists who scored between 24.4% to 30%.
Acting prime minister Jose Socrates said he accepted responsibility for the defeat and resigned as head of his party.
''This defeat is entirely mine and I want to assume full responsibility for it,'' Mr Socrates said in Lisbon.
The Social Democrats led by Pedro Passos Coelho are expected to form a majority with the CDS Party.
The BBC reports the new government has to implement an austerity programme as a condition for a bail-out by the European Union.
All the main parties back the 78 billion euro ($US116 billion) bail-out, which requires tough austerity measures amid a faltering economy and a debt crisis.
Portugal is faced with unemployment of more than 12% and an economy that is expected to contract by 2% this year and next.
