"Grillo will play a decisive role. He has to decide whether to strike a limited agreement with the left or whether to go for fresh elections," said Roberto D'Alimonte, a politics professor at Rome's LUISS university. "All the cards are in his hands," D'Alimonte said.
It is a stunning turn of events for the tousle-haired 64-year-old who has spoken to packed squares across the country during the campaign, channelling the discontent of Italians fed up with austerity and corrupt politicians.
Grillo set up his group in 2009, initially as one of several citizen movements against then prime minister Silvio Berlusconi.
It was dismissed as a sideshow in Italian politics but it quickly captured youth support with its irreverent and Internet-based campaigning.
As scandals have mounted in recent months in Italy over the massive waste of public funds by politicians showered with perks and cash handouts, the M5S has gained in popularity and become a political force.