The rivals will have to move to the center now to win more votes in the runoff, said Maurício Santoro, professor at Rio de Janeiro state university.
Haddad must now reverse current electoral momentum within just 21 days, or watch the wave that swept Bolsonaro to a first round victory carry the former army captain into office. Much of that focused on the Workers' Party, and many voters cited a desire to root out corruption in their choice of Bolsonaro.
"I didn't like any of the candidates and I felt obliged to choose the lesser of two evils", said Frederico Vasconcellos, a 68-year-old retired metalworker.
The far-right presidential candidate in Brazil has trounced his opposition in the first round of voting.
The Congressman publicly advocates military intervention as a way to fight corruption.
He capitalised on Brazilians' deep anger with their traditional political class and "throw the bums out" rage after a massive corruption investigation revealed staggering levels of graft. Since 2014, they've watched slack-jawed as prosecutors detailed how many in government manipulated public contracts and promised favours in exchange for billions of dollars in kickbacks and bribes. "I have the utmost respect and admiration for the work they did", said Mr. Haddad.
Haddad, a former education minister and one-term mayor of Sao Paulo, had portrayed a vote for him as a show of support for Workers Party founder and former President Luiz Inacio Lula da Silva, whom many voters associate with good economic times and falling inequality.
But Bolsonaro's fiery anti-democratic rhetoric of the past, his stance that Brazil's already notoriously violent police should kill as many criminals as possible, and his desire to rollback progressives' gains in recent years have enraged a large number of voters.
The final numbers showed a steady increase in Bolsonaro's support in comparison to the last opinion polls.
He was unable to campaign or participate in debates as he underwent surgeries during a three-week hospital stay, but instead brought messages directly to voters via Facebook and Twitter.
Where Brazil's next leader takes the economy, the largest in Latin America, will have a large impact on surrounding countries that are trading partners with Brazil.
Mr Bolsonaro's stabbing forced candidates, and Mr Bolsonaro himself, to shift strategies and recalibrate.
"We expected to win in the first round", 77-year-old retiree Lourdes Azevedo said in Rio de Janeiro.
Caught in the middle are Brazilians who dislike both candidates and see them as symbols of a broken system.
Now Bolsonaro and Haddad, the two top candidates from a field of 13 on Sunday, will have to duke it out on October 28.
"We've been on this path of insane bipolarity".
At a news conference afterward, Haddad cast the second round as pitting Bolsonaro's "neoliberalism" against the social programs that the PT has promoted.