Theresa May is to meet with the Queen at 12.30pm to seek permission to form a Government, suggesting a deal with the DUP has already been struck.
The move came after it was made clear that Mrs May has no intention of standing down as Conservative leader, despite calls from among her own MPs for her to consider her position.
As the June 8 poll ended in a hung parliament, with no party holding an absolute majority in the House of Commons, Mrs May pledged to offer “stability” if the Tories end up as the largest party with the most votes.
It was reported today that she has “no intention of resigning” as Prime Minister.
Conservative former minister Anna Soubry said she should “consider her position” and take personal responsibility for a “dreadful” campaign and a “deeply flawed” manifesto after choosing to go to the country three years early in the hope of extending her majority.
Labour leader Jeremy Corbyn called on the Prime Minister to resign, saying she should “go and make way for a government that is truly representative of this country”.
Former chancellor George Osborne, sacked from the Cabinet by Mrs May and now editor of the Evening Standard, told ITV: “Clearly if she’s got a worse result than two years ago and is almost unable to form a government then she I doubt will survive in the long term as Conservative party leader.”
With 630 out of 650 constituencies declared, a Press Association forecast predicted that Tories would end up with 320 seats, 10 fewer than when the election was called and six short of an absolute majority.
Labour was heading for 260 seats, the Liberal Democrats for 14, the Scottish National Party 34, Plaid Cymru three and Greens one, according to the PA analysis.
A BBC projection put the Tories on 43% overall, about six points up on David Cameron’s result in 2015, and Labour on 40%, spectacularly outpolling Ed Miliband and Gordon Brown’s results and even racking up more votes than Tony Blair did when he won power in 2005.
The DUP, which increased its representation at Westminster from eight to 10, earlier signalled it was ready to discuss working with Tories on issues such as Brexit and keeping the UK together.
With the party in a position to hold the balance of power at Westminster, senior MP Sir Jeffrey Donaldson said the DUP would be “serious players” in the hung parliament, telling the BBC: “This is perfect territory for the DUP because obviously if the Conservatives are just short of an overall majority it puts us in a very strong negotiating position and certainly that is one we would take up with relish.”
Three gains by Sinn Fein, which does not take up seats in Westminster, made it slightly easier for a combination of parties to achieve a working majority.
The pound plummeted as the shock figures set the scene for political turmoil at Westminster, disruption to upcoming Brexit negotiations and the possibility of a second election later in the year.
The night was marked by a collapse in Ukip support and a rash of high-profile losses for the SNP, as British politics returned to a two-party system on the greatest scale since the 1970s.
The Tories lost seven frontbenchers, with ministers Jane Ellison, Simon Kirby, Gavin Barwell, James Wharton, Nicola Blackwood and Rob Wilson going down to defeat, along with Cabinet Office minister Ben Gummer, the author of the widely criticised Tory manifesto.
Ukip leader Paul Nuttall faced humiliation in Boston & Skegness, where he came in a distant third, and the eurosceptic party lost its only Westminster seat in Clacton.
As Ukip voters switched to Labour and the Tories across the country, Mr Nuttall said Mrs May had put the Brexit process in “jeopardy” just 10 days before talks were due to begin in Brussels.
High-profile casualties of a night of shock defeats included Liberal Democrat former leader and ex-deputy prime minister Nick Clegg in Sheffield Hallam, Scotland’s former first minister Alex Salmond in Banff & Buchan and the SNP’s leader in Westminster Angus Robertson in Moray.
Home Secretary Amber Rudd and Education Secretary Justine Greening hung onto their seats by the skin of their teeth with much reduced majorities.
Accepting victory in Islington North, Mr Corbyn said voters had opted for hope and “turned their backs on the politics of austerity”.
In an attack on Mrs May he said: “The Prime Minister called the election because she wanted a mandate.
“Well the mandate she has got is lost Conservative seats, lost votes, lost support and lost confidence.
“I would have thought that’s enough to go, actually, and make way for a government that will be truly representative of all the people of this country.”
Speaking as she was re-elected MP for Maidenhead, Mrs May said: “At this time, more than anything else, this country needs a period of stability.
“If, as the indications have shown and if this is correct, the Conservative Party has won the most seats and probably the most votes, then it will be incumbent on us to ensure that we have that period of stability and that is exactly what we will do.”
Asked if Mrs May could remain as Tory leader, Ms Soubry told the BBC: “That is a matter for her. It is bad. She is in a very difficult place.
“She’s a remarkable and very talented woman and she doesn’t shy away from difficult decisions, but she now has to obviously consider her position.”
Mrs May drove direct from the Maidenhead count to Conservative HQ in London, where she was hunkered down in talks with aides as dawn broke before moving on to 10 Downing Street.
Labour deputy leader Tom Watson said: “Theresa May’s authority has been undermined by this election. She is a damaged Prime Minister whose reputation may never recover.”
Mr Osborne said there would be “a very big post mortem coming”
Brexit Secretary David Davis said he would “fight tooth and nail” to keep Mrs May in post, and dismissed suggestions he might be a contender to replace her.
“The simple truth is we have a Prime Minister, she is a very good leader, I’m a big supporter of hers,” Mr Davis told the Press Association.
“I’ll fight tooth and nail to keep her in place.”
Foreign Secretary Boris Johnson, often tipped as a potential successor to Mrs May as Tory leader, said: “We’ve got to listen to our constituents and listen to their concerns.”
Liberal Democrats were celebrating the return of former ministers Sir Vince Cable, Sir Ed Davey and Jo Swinson two years after they lost their parliamentary seats.
And Tim Farron’s party took Bath back from the Conservatives and regained Caithness, Sutherland & Easter Ross and Edinburgh West, which were lost to the SNP in 2015.
Mr Farron held on to his Westmorland & Lonsdale seat in Cumbria on a much-reduced majority, down from 8,949 in 2015 to just 777 now.
Labour took Canterbury, a seat which had been held by Conservatives since 1918, and claimed Tory scalps in a string of seats including Bristol North West, Stroud, Warwick & Leamington, Stockton South and Vale of Clwyd.
Shadow foreign secretary Emily Thornberry said Labour “could form the next government” and would attempt to do so as a minority government if results allowed, rather than seeking to form a coalition with other progressive parties like the Lib Dems.