Magdalena Andersson told news agency TT that the Sweden Democrats who blocked a government election and triggered early elections an on Friday, were a "neo-fascist party".
"It's a party that doesn't stand for the basic value that all human beings are equal, which now raises its voice and wants to dictate the terms in Swedish politics."
Andersson said: "What we have here is a neo-fascist party which believes it must have a decisive influence and set the agenda in Swedish politics."
The Sweden Democrats, who announced that they would turn the new election in March into a referendum on immigration, responded late on Friday.
Stand-in leader Mattias Karlsson said that the finance minister was rude.
"I think it is both ignorant and rude by a minister to insinuate that nearly one million Swedes would be fascists, said Mattias Karlsson to Swedish Radio News.
What do you think the term comes from?
"I interpret it as an attempt to engage in scaremongering and avoid the merits of the case, in the case of the failure of immigration policy," he said.
On Wednesday, the Swedish parliament approved an opposition budget proposal, passed thanks to backing by the Swedish Democrats, who hold the balance of power in the chamber after winning 12.9 percent of the vote in the September election and gaining 49 seats in parliament.