The result from Sunday's second round poll threw French politics into turmoil, raising the prospect of a paralysed legislature or messy coalitions with Macron forced to reach out to new allies.
Macron, 44, now also risks being distracted by domestic problems as he seeks to play a prominent role in putting an end to Russia's invasion of Ukraine and as a key statesman in the EU.
Macron's "Together" coalition will still be the biggest party in the next National Assembly. But with 245 seats, according to full interior ministry results announced in the early hours of Monday, it is well short of the 289 seats needed for a majority in the 577-member chamber.
"This situation constitutes a risk for our country, given the challenges that we have to confront," Prime Minister Elisabeth Borne said in a televised statement, vowing: "We will work from tomorrow to build a working majority."
The outcome severely tarnished Macron's April presidential election victory when he defeated the far-right to be the first French president to win a second term in over two decades.
"It's a turning point for his image of invincibility," said Bruno Cautres, a researcher at the Centre for Political Research of Sciences Po.
Le Monde daily headlined on its website: "Macron faces the risk of political paralysis," while the Le Figaro daily said the results raised the spectre of a "stillborn new mandate".
'Failure for Macron'
The new left-wing coalition NUPES under 70-year-old hard-left figurehead Jean-Luc Melenchon won 135 seats, according to an AFP count based on the results published by the ministry.
The coalition, formed in May after the left splintered for April's presidential elections, brings together Socialists, the hard left, Communists and greens.
Melenchon called Sunday's results "above all an electoral failure" for Macron.
"The rout of the presidential party is total and there will be no majority" in parliament, he told cheering supporters in Paris.
A prominent MP from Melenchon's party, Alexis Corbiere, said the result meant Macron's plan to raise the French retirement age to 65 had been "sunk".
Far-right leader Marine Le Pen's National Rally party made huge gains and will send 89 MPs to the new parliament, making it the biggest rightwing force in parliament ahead of the traditional right The Republicans (LR).
Le Pen hailed a historic result for her party, saying it would send "by far" its highest number of MPs to the next National Assembly.
Macron had hoped to stamp his second term with an ambitious programme of tax cuts, welfare reform and raising the retirement age. All that is now in question.
"This will complicate the reforms... It will be much more difficult to govern," said Dominique Rousseau, professor of law at Paris Pantheon-Sorbonne University.
"The slap," said the headline in the left-leaning Liberation's Monday edition, adding the results represented the "fall" of Macron's way of governing.
There could now potentially be weeks of political deadlock as the president seeks to reach out to new parties.
The most likely option would be an alliance with the Republicans, the traditional party of the French right, which has 61 MPs.
LR president Christian Jacob however made clear there would be no easy partnership, saying his party intended to "stay in opposition".
Economy Minister Bruno Le Maire denied that France would be ungovernable but admitted "a lot of imagination would be needed" from the ruling party in an "unprecedented situation".
Macron had called on voters to hand his coalition a "solid majority" last week, adding "nothing would be worse than adding French disorder to the world disorder".
Three ministers felled
In another blow, key ministers standing for election were set to lose their jobs under a convention that they should resign if they fail to win seats.
Health Minister Brigitte Bourguignon, Maritime Minister Justine Benin and Environment Minister Amelie de Montchalin -- a pillar of Macron's administration over the last years -- all lost and will now exit the government.
Two other close Macron allies, parliament speaker Richard Ferrand and former interior minister Christophe Castaner, both acknowledged defeat in the fight for their seats.
In a rare spot of good news for the president, Europe Minister Clement Beaune and Public Service Minister Stanislas Guerini -- both young pillars of his party -- won tight battles for their seats.
On the left, Rachel Keke, a former cleaning lady who campaigned for better working conditions at her hotel, was also elected, defeating Macron's former sports minister Roxana Maracineanu.
Turnout was low, with the abstention rate recorded at 53.77 percent, according to the interior ministry, higher than the first round but not beating the record worst turnout of 2017.