The right-wing AfD party, only formed three years ago, came second in the chancellor's home state of Mecklenburg-West Pomerania, polling 21%.
One senior CDU figure blamed the mass influx of refugees without documents.
Some 1.1 million refugees and migrants entered Germany in 2015.
Many of them arrived after the government decided to loosen border controls just over a year ago.
The AfD leader in Mecklenburg-West Pomerania, Leif-Erik Holm, suggested that "perhaps this is the beginning of the end of Angela Merkel's chancellorship".
AfD (Alternative fuer Deutschland) now has delegates in nine of Germany's 18 states.
"It's a debacle for Angela Merkel and her refugee policy," said Edmund Stoiber, honorary chairman of the Bavarian-based CSU, the sister party of the CDU.
It was not enough to criticise the AfD's voters, he argued - the CDU had to understand why people were losing faith in its policies.
Mr Stoiber called for a limit on the number of people entering Germany.
How the parties polled:
SPD (centre-left Social Democrats): 30.6%
AfD: 20.8%
CDU: 19%, its worst-ever showing in the state
The CDU is in coalition nationally with the SPD, and also regionally in Mecklenburg-West Pomerania, although that may now change.
The CDU is in coalition nationally with the SPD, and also regionally in Mecklenburg-West Pomerania, although that may now change.
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