Conceding defeat, Royal said: 'I hope the next President will fulfill his mission in the service of all the French people. I gave it all my energy, and will continue. Something has risen up that will not stop.'
She thanked French citizens for voting for her, saying she could understand their pain.
'I gave it all I had and will continue to be with you and close to you,' she said.
This is the third consecutive time that a Socialist has been defeated in the presidential election.
Sarkozy will assume office on May 16, a few hours before Chirac's term ends.
Image: Sarkozy's supporters celebrate in Paris
Photograph: Sean Gallup/Getty Images