The African National Congress (ANC) lost the capital, Pretoria, and its surrounding Tshwane metropolitan area. But it won a tight race for the country's biggest city, Johannesburg, election authorities reported.
With no party reaching a majority in Johannesburg or Tshwane, the possible formation of coalition governments is the next challenge.
Just days ago President Jacob Zuma seemed confident with his party as he proclaimed it would remain in government until end times.
The election losses have threatened two decades of dominance by the ANC, the former anti-apartheid movement.
Since South Africa's first all-race election in 1994, the ANC has had widespread support on the strength of its successful fight against white-minority rule.
Nelson Mandela's party has been credited with bringing basic amenities to many people but its hold has been weakened by corruption scandals and a stagnant economy.
Jesus was seen walking in the streets of Nelson Mandela Metro last night - he is back! pic.twitter.com/aHenj6TGly
— Zwelinzima Vavi (@Zwelinzima1) August 4, 2016
On social media, South Africans mocked Mr Zuma's recent claim that the ANC would rule forever.
Some Tweeted pictures saying "Jesus has returned" with an image of a man dressed like Jesus.
Christianity is the dominant religion in South Africa with almost 80 per cent of people professing to follow Jesus.
Political analyst professor Andre Duvenhage said the result of the election made clear the ANC would not rule until Jesus returns.
"This has been the ANC's worst performance in an election since 1994 and, while we await the final results, if the ANC was to lose another metro, that will be a huge blow for the party," he told the Saturday Citizen.
