In the days leading up to the regional votes, Merkel's CDU and its CSU Bavarian sister party were also rocked by revelations of lawmakers apparently profiting from deals to procure face masks in the early days of the pandemic.
In Rhineland-Palatinate, the left-leaning Social Democrats came first with 35.5 per cent of the vote ahead of the CDU.
"To say it very clearly, this isn't a good election evening for the CDU", said the party's general secretary, Paul Ziemiak.
The Green party meanwhile held on to first place, garnering more than 31 percent of votes, its bestresult in any regional election yet.
The state is an outlier in Germany because it has been run by a premier from the Green party for over a decade, Winfried Kretschmann.
Kretschmann, 72, a fatherly figure with a conservative image, featured on Green election posters with the slogan 'You know me.' That was a slogan Merkel famously once used in a pre-election debate to underline her own largely ideology-free appeal.
Merkel, in power since 2005, is not seeking re-election at the national vote and her Christian Democratic Union (CDU) is already missing the "Merkel bonus" she has brought them with four consecutive national election victories.
In Baden-Wuerttemberg, the Green party, now in a coalition with the CDU, was expected to widen its lead over Merkel's party.
In Rhineland-Palatinate, the SPD, whose national ratings have been fading, was expected to keep a narrow lead of the back of Governor Malu Dreyer's popularity.
There must be serious doubt over whether Armin Laschet, who was elected party leader less than two months ago, can now be trusted to be its candidate for chancellor in September.
"This is a dark hour for the CDU", said Die Welt daily.
Ms Chaze added that Baden-Wurttemberg alone saw 500,000 first time voters particularly from new, young voters who are more inclined to vote for progressive parties that wouldn't necessarily be the conservatives.
The Union bloc of CDU and CSU benefited from Merkel's perceived good management of the pandemic past year.
Their national co-leader, Robert Habeck, described Sunday's votes as "a super start to the super election year, and we will hopefully be able to take the tailwind from Baden-Wuerttemberg and Rhineland-Palatinate at full sail".
The 54-year-old Soeder has, however, remained coy about his Berlin ambitions, regularly insisting that his political home remains in Bavaria.
"What we see today is that forming a government is possible without the CDU, ' said the Social Democrats" candidate for chancellor, current Finance Minister Olaf Scholz.
'And that is what we are aiming for in the federal election campaign'.
One party that didn't benefit from discontent was the far-right Alternative for Germany, which has opposed coronavirus restrictions and is in a court standoff with the domestic intelligence agency over whether it can be put under observation as a "suspected case" of right-wing extremism.