Hollande led Sarkozy by 28.63% to 27.08%, the Interior Ministry said today (23 April), sending the two head-to-head in a decider on 6 May that may be closer than pundits had expected.
Le Pen's record score of 18.1% was the sensation of the night, beating her father's 2002 result and outpolling leftist Jean-Luc Mélenchon who showed in fourth place at 11.13%. Centrist François Bayrou finished fifth on 9.11%.
The remaining five candidates did not cross the 5% threshold.
Eva Joly, a Norwegian-born magistrate running for the Green party, won 2.28%. Nicolas Dupont-Aignan, a sovereigntist, won 1.8%, Philippe Poutou from the New Anti-capitalist Party got 1.15%, and Nathalie Arthaud from Lutte Ouvrière, a French Trotskist party – 0.57%. In last place was Jacques Cheminade, running for president for the second time, won 0.25%.
Turnout was 81%, much higher than expected.
Hollande, 57, told cheering supporters he was best placed to lead France towards change and declared: "My final duty, and I know I'm being watched from beyond our borders, is to put Europe back on the path of growth and employment."
Sarkozy, who has led the world's fifth largest economy for five years, responded defiantly to his setback - the first time in the 54-year history of the present electoral system that a sitting president seeking re-election had been beaten into second place in the first round.
In a rousing speech, he challenged his Socialist rival to three television debates over the next two weeks instead of the customary one, and vowed in response to Le Pen's surge to tighten border controls, stop factories leaving France, make work pay and defend law and order.
Two opinion polls taken during Sunday's voting by the IPSOS and Ifop institutes suggested the Socialist would beat the incumbent by 54% to 46% in the second round. But much yet depends on how each appeals to supporters of Le Pen and others.
"Sarkozy is going to be torn between campaigning in the middle ground and campaigning on the right. He'll have to reach out to the right between the rounds and so he'll lose the centre," said Stephane Rozes of the CAP think tank.
Le Pen, who took over the anti-immigration National Front in 2011, wants jobs reserved for French nationals at a time when jobless claims are at a 12-year high. She also wants France to abandon the euro currency and restore monetary policy to Paris.
National Front looks to parliamentary election
"This first round is the start of a vast gathering of right-wing patriots," she told cheering supporters at her campaign headquarters, without endorsing either finalist and slamming Sarkozy. "Nothing will ever be the same again."
Le Pen said she would announce her voting intentions for the second round during the National Front political rally on 1 May. She also said that no matter what, her party from now on would be the main opposition force.
Jean-Marie Le Pen, 83, visibly elated at his daughter's result, said the National Front would now focus on winning seats in June parliamentary elections. He also said that he saw Sarkozy as "finished".
The IPSOS survey suggested 60% of Le Pen's voters would back Sarkozy in the second round, while Ifop put the proportion at 48%, with one in five voting for Hollande.
'Nothing in bag'
Sarkozy's closest supporters insisted he still had a fighting chance now that the president is facing a single challenger instead of nine in the first round.
"Nothing is in the bag yet," said Foreign Minister Alain Juppé.
The elder Le Pen's 16.9% score in the 2002 first round caused a political earthquake, knocking then-Socialist Prime Minister Lionel Jospin out of the runoff and forcing left-wing voters to rally behind conservative Jacques Chirac.
Sarkozy, also 57, has painted himself as the safest pair of hands to lead France and the eurozone in turbulent times, but Sunday's vote appeared to be a strong rejection of his flashy style as well as his economic record.
If Hollande wins, joining a small minority of left-wing governments in Europe, he has promised to renegotiate a European budget discipline treaty signed by Sarkozy. That could presage tension with German Chancellor Angela Merkel, who made the pact a condition for further assistance to troubled euro zone states.
The prospect of friction is causing some concern in financial markets, as is Hollande's focus on tax rises over austerity at a time when sluggish growth is threatening France's ability to meet deficit-cutting goals.
EurActiv France has produced profiles of all major candidates and analysed their stances on European issues. These are the profiles of the contenders for the run-off:
France's sickly growth, along with its stubbornly high unemployment, are major factors hampering Sarkozy's battle to win a second term, despite an energetic campaign against the blander but more popular Hollande.
Mélenchon, whose clench-fisted call for an anti-capitalist revolution made him the most colourful figure on the campaign trail, appealed to left-wing voters to make sure Sarkozy is ousted in two weeks' time by voting for Hollande.
"I call on you to come out on 6 May and beat Sarkozy without asking for anything in exchange. I urge you: don't drag your heels, mobilise as though it were me you were sending to victory in the presidential election," he said.
Pressed on television to come out and endorse Hollande by name, Mélenchon said: "We must use the only space on the ballot available. Is there anyone else? I want to beat Sarkozy."
The Socialist also won the endorsement of Greens candidate Eva Joly, who scored 2.2%.
If Sarkozy loses, he would be the 11th eurozone leader to be swept out since the start of the bloc's debt crisis in 2009 and the first French president to lose a re-election bid in more than 30 years. A deep dislike of his personal style, seen as arrogant and vulgar, drove many to vote against him.
Hollande promises less drastic spending cuts and wants higher taxes on the wealthy to fund state-aided job creation, in particular a 75% tax rate on income above €1 million.
If he wins, he would be the first left-wing leader since François Mitterrand, who beat incumbent Valéry Giscard-d'Estaing in 1981 and ruled until 1995.
A swing to a Socialist government in France could alter the direction of Europe at a time when worries are resurfacing over the eurozone debt crisis and in particular over France's strained public finances, which already triggered a downgrade of Paris's AAA credit rating by Standard & Poors in January.
Sarkozy has played up his credibility as an economic steward after he helped steer the eurozone through the worst of its crisis last year. Hollande has blamed him for the parlous state of France's public finances and for the rating downgrade.
Some investors see a risk that Hollande's focus on tax rises over spending cuts, his slower timetable for balancing the budget and his plan to raise taxation on the financial sector, could drive up French bond yields.
However, many economists see both Hollande and Sarkozy being obliged to pursue fairly similar, fiscally tight, economic policies. Differences between the two on France's wider European and foreign policies are also seen as relatively limited.