The Conservatives won a total of 143 seats -- 16 more than before -- but 155 seats were needed for a majority.
Harper called the snap elections in an attempt to gain a majority in Parliament, and will now need the support from at least one of the three opposition parties to govern the country during the global economic crisis.
Harper lauded his party's seat gain, while seeking to reassure voters he will work with the other parties.
"Our party is bigger, our support base is broader and more and more Canadians are finding a home in the Conservative Party," he said, according to the Associated Press.
"We have shown that minority government can work and at this time of global economic instability, we owe it to Canadians to demonstrate this once again. ... We hold out a hand to all members of all parties asking them to join together to protect the economy and weather this world financial crisis."
The major opposition Liberal Party, led by Stephane Dion, won 76 out of the 308 seats in Parliament, marking a loss of 19 seats and the lowest score for the Liberals since 1984.
Jim Travers, national affairs columnist for The Toronto Star, attributed the Liberals' loss to "an ineffectual leader, Stephane Dion, and an inept campaign."
Dion's campaign was also hindered by his unpopular plan to tax all fossil fuels except gasoline, which "Dion couldn't adequately explain to Canadians," Travers said. A former professor from French-speaking Quebec, Dion struggled to connect with English-speaking voters.
Dion, who showed no signal of stepping down as leader, on Wednesday offered the Conservatives his "full cooperation in these difficult economic times."
The other two opposition parties -- the separatist Bloc Quebecois and the left-wing New Democratic Party -- won 50 seats and 37 seats, respectively.
Canada was the first big economic power to hold elections since the financial crisis, which came to dominate the campaign.
The economic meltdown initially boosted the Liberals' popularity after Harper made some "careless remarks at a time when Canadians are worried about their jobs and pensions," Travers observed. And, Harper, whose Conservative Party supports less government intervention in economic matters, was criticized for being slow to respond to the turmoil and as being dismissive of Canadians' concerns.
Ultimately, however, Travers said, "it played to Harper's advantage because he was seen as the stronger leader and the firmer hand in troubled times."
Voter turnout registered at 59 percent -- one of the lowest in Canada. Travers found that factor notable because "when there's so much uncertainty and angst during this time of economic crisis, voters did not express it by running to the polls.
"What you could see from this is that voters hedged their bets: They allowed the prime minister to stay in power because he's seen as the most able leader, but they gave him a minority government."