Parliament voted 200 to 116 against giving Lofven, currently caretaker prime minister, a new term.
Sweden's parliament voted as expected on Friday against giving Social Democrat Stefan Lofven's centre-left coalition a second term in office, bringing a fresh election a step closer after three months of political deadlock.
September's vote produced a hung parliament and the centre-left and centre-right blocs have been unable to reach a deal on a new government that would keep the anti-immigration Sweden Democrats from being able to have a say in policy.
Parliament voted 200 to 116 against giving Lofven, currently caretaker prime minister, a new term. It had already voted once for Lofven's ouster in a mandatory vote in September but has also rejected centre-right leader Ulf Kristersson as prime minister, leaving the way forward unclear.
"Parties are pushing Sweden toward a snap election," speaker Andreas Norlen said in a statement."
I have therefore decided that I should start to take steps in order to prepare for that."
Norlen hopes the threat of a fresh vote will force parties into a compromise.
The Greens, part of Lofven's minority coalition between 2014 and 2018, and the opposition Liberals are close to the threshold for seats in parliament and neither will be keen on a new vote.
A snap election could also strengthen the position of the Sweden Democrats, a populist party with roots in the white supremacist fringe, something all the mainstream parties want to avoid.
The speaker will outline his plans at the start of next week.
The Centre Party - nominally part of Kristersson's four-party Alliance bloc - will be key to a solution.
It voted against Kristersson as prime minister saying that a minority Alliance government would need support from the Sweden Democrats.
Instead, leader Annie Loof offered to back Lofven in return for agreement on tax cuts and deregulation, but talks collapsed at the last minute and the Centre Party voted against Lofven in Friday's ballot.
With the speaker likely to nominate Kristersson for a second time and, if he fails, to give Lofven a final chance, Loof now faces a fresh choice between the two.
"The Centre Party will not be part of a government ... which requires the SwedenDemocrats' active support," Loof said on Friday. "We will not support any such a grouping or a coalition where we are dependent on the Sweden Democrats."
Parliament can reject two more candidates for prime minister before a new election must be called.