Political analysts said his Croatian Democratic Union (HDZ) had prevailed over an opposition coalition on the strength of his hero status after masterminding the reconquest of Serb-occupied lands in recent months.
But Mr Tudjman was denied the two-thirds majority he needs to enshrine his authoritarian rule in the constitution, following a backlash against his cult of personality, and HDZ abuses of power.
"Western observers underestimate Croats. Many want no part of unscrupulous one-party or one-man rule," said Slaven Letica, a former Tudjman adviser.
The HDZ, which steered Croatia to independence in 1991, had 44 per cent of the vote with 71 per cent of ballots counted, the election commission said. A moderate opposition coalition led by the Peasant Party was running a distant second at 18.5 per cent and the Social Liberals were just short of 12 per cent.
Mr Letica said the HDZ could count on 53 to 56 per cent of the 127 seats but only with the fresh addition of 12 reserved for the Croat "diaspora", who voted overwhelmingly for the government. The government summarily enfranchised 365,000 expatriate Croats, overwhelmingly pro-HDZ rightists and most of them in Bosnia, in a manoeuvre that Western observers felt had unfairly tilted the election outcome.
HDZ-controlled state television's favourable coverage of Mr Tudjman's campaign and its restrictive approach to airing the opposition's agenda disturbed European monitors.
Council of Europe observers said the government might have to change its new election law before being considered for membership.
The government called the elections nine months early to try to obtain a two-thirds majority. But HDZ candidates beat rivals handily only in regions near former or current front lines, including one remaining rebel enclave, Eastern Slavonia, that Mr Tudjman has vowed to reconquer by Christmas. Opposition parties trounced the HDZ in Zagreb, and in liberal havens such as Istria, which has been largely untouched by ethnic strife since 1991. Extreme right-wing parties were all but wiped out.