With 99.95 percent of the ballots counted, Podemos had won 14.8 percent of the vote in the southern region according to the regional government, not enough to challenge the country's two traditional political heavyweights.
The main opposition Socialist Party, in power in Andalusia since 1982, topped the poll with 35.4 percent of the vote.
The conservative Popular Party, the country's ruling party, came second with 26.7 percent — down from 40 percent in the previous election in 2012.
The two parties have taken turns governing Spain since the 1980s but with a national election due around November they are nervously eyeing the rise of Podemos — buoyed by the victory of its ally Syriza in Greece — and that of another upstart, the centre-right Ciudadanos (Citizens).
"Thank you Andalucia… thank you for taking this first step, we will move forward," Podemos leader Pablo Iglesias said on Twitter.
Podemos told the private Sexta channel that it had weakened the country's "bipartisanship", noting that the two main parties together claimed 80 percent of the Andalusian vote in the last election, compared to around 60 percent now.
Deputy leader Inigo Errejon added that Andalusia, one of the country's poorest regions, was different from other parts of Spain with a "more rural" and older population inclined "to preserve the traditional balance".
Sunday's vote in the recession-ravaged region of farms and tourist beaches was seen as a prime testing ground for Spain's new political dynamic, transformed by the economic crisis and ensuing austerity measures.
The near-complete results gave no single party an absolute majority in the regional parliament from Andalusia's 6.5 million voters.
If confirmed, the Socialists would take 47 out the 109 seats up for grabs, the Popular Party would secure 33 seats, Podemos would take 15 and Ciudadanos nine after winning nine percent of the vote.
"Everyone will interpret the results (in Andalusia) as if it were a first round in the general elections," said Anton Losada, a political scientist at Santiago de Compostela university.
The winner may have to strike an alliance with Podemos or Ciudadanos, foreshadowing what coalitions may later be forged to govern Spain.
Andalusia was among the regions hardest hit by the collapse of Spain's housing market and ensuing financial crisis in 2008. Its unemployment rate is the highest in Europe at 34.2 percent.
Socialist leaders there, along with some union representatives, have been hit by a series of corruption scandals. They have also fallen out with their current coalition partners, the United Left.
The near-complete results Sunday were in line with opinion polls, which had predicted a loss of support for the Popular Party, blamed by voters for hardship under the economic cuts its national government has imposed.
Podemos and Ciudadanos had ranked third and fourth respectively in polls of voting intentions in Andalusia.
Formed only in January 2014, Podemos has topped national opinion polls.
Like its Greek ally Syriza, it has tapped into a wave of discontent about painful austerity measures imposed during the economic crisis.
Podemos was initially boosted by Syriza's January election victory, but has been given pause for thought by the ongoing squabbles between the Greek party and European powers over the country's crippling debt.
Podemos's pony-tailed leader Iglesias, 36, has vowed to end austerity and do away with what he brands a corrupt political elite.
But his alleged links to Venezuelan leaders — regular bogeymen in the Spanish media — and his support for Syriza could put off some voters.
Ready to scoop them up is Ciudadanos, which started as a Catalan anti-independence party and has expanded onto the national stage in recent months. It shares Podemos's stance against corruption but strikes a more moderate tone.
"In Ciudadanos, we want justice. What Podemos wants is revenge," party leader Albert Rivera, 35, said in a recent interview in El Mundo newspaper.