The president has little impact on day to day running of the country but nominates the next prime minister, who will have to form a coalition cabinet after the previous government's collapse in October, delaying much-needed IMF aid.
Basescu, 58, will face leftist leader Mircea Geoana, 51, in a 6 December run-off in the Balkan nation.
Exit polls by pollsters INSOMAR and CURS showed Basescu garnering 33-34% of the vote with Geoana closely behind with 31-32%. Under Romanian law, a second round is needed if no candidate wins more than 50% of votes.
Sunday's vote had been a key obstacle to political stability in recent months, with Basescu's Democrat-Liberal Party and Geoana's Social Democrats unwilling to work together to end the impasse, putting on hold a 20 billion euro IMF aid package and damaging investor confidence.
The new government's main tasks will be to win back the trust of international lenders, including the International Monetary Fund and the European Commission, by introducing painful budget cuts to bring the economy out of recession.
"What matters at the moment for markets is to have a president and a government as soon as possible and the IMF deal back on track," said Nicolaie Alexandru-Chidesciuc from ING Bank in Bucharest.
Broad reforms are vital. Twenty years after the end of communist rule the country of 22 million is one of the poorest and most graft-prone corners of the EU.
The economy is expected to shrink up to 8% in 2009, millions of Romanians live on less than 100 euros ($149) a month and no top officials accused of graft have been convicted.
Intense talks ahead
Both Basescu and Geoana vow to move quickly with government talks and to mend relations with the IMF, but broad reforms may be in question regardless of which one wins.
If Basescu is elected, he would likely want to revive his drive to combat pervasive corruption and cooperate closely with the central bank to mend the stricken economy.
But to succeed, he has to tone down his confrontational style that has riled rivals and discouraged voters.
"Romania urgently needs a government," Basescu told supporters after exit poll results came out.
A government linked to Geoana is more likely to find support from other centrists in parliament than Basescu, possibly forming a more stable cabinet.
Geoana's election would also bring back to power old-hand politicians from the PSD, a party with deep roots in Romania's communist regime. The party's rule during the early years after the collapse of communism in 1989 was marred by slow economic transformation and sleaze scandals.
"It is very difficult to predict the winner. There are many votes to split between the two candidates. But Basescu is the best option for reforms," commentator Cristian Patrasconiu said.
After several years of strong economic growth, Romania was one of the hardest hit in the region over the last year when the global crisis cut off sources of cash, raising jobless rates.
Once widely popular, Basescu appears to have taken the brunt of voter anger, with many Romanians drawn by Geoana's promises of social protection and blaming Basescu for bickering that has delayed economic reforms.
"In five years, nothing has changed," said Georgeta Mihai, 40, a housewife from the village of Sintesti near Bucharest.
Across the country many Romanians feel similarly left behind by economic progress that has largely benefitted urban residents and the ruling elites.
The vast majority of Sintesti residents depend on day jobs on construction sites, many of which have disappeared fast as recession battered the real estate industry, a cornerstone of fast economic growth in recent years.
In a referendum tacked on to the election, voters also backed a plan by Basescu to downsize parliament by cutting the number of seats by more than a third and eliminating one of the legislature's chambers.
(EurActiv with Reuters.)
