The DA will need to form a coalition in order to secure control there.
The two major parties are also locked in a tight race to control the country's largest city, Johannesburg.
The ANC has also lost Nelson Mandela Bay metropolitan area in the Eastern Cape, which includes Port Elizabeth, to the DA
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End of racial politics?
It is the ANC's worst electoral performance since it was elected to power at the end of apartheid and the replacement of white minority rule by democracy in 1994, and the first time since then that it has lost control of the capital.
The DA has won 93 seats in Tshwane while the ANC is second with 89 seats in the 214-seat municipal council Observers say a host of corruption scandals and internal party squabbles are to blame for the ANC's decline.
The South African economy has stagnated since 2008's global financial crisis, and the country has one of the highest rates of economic inequality in the world.
Revelations that upgrades to President Jacob Zuma's private home were funded with $20m of public money caused an outcry. The Constitutional Court recently instructed Mr Zuma to reimburse the state $507,000.
Clearly the ANC still commands huge support across the country but that support is waning. It can no longer take it for granted that the black majority will blindly follow it.
A good example is in the Nelson Mandela Bay municipality, won by the DA, which has a rich history of anti-apartheid struggle. Its new DA mayor is Athol Trollip, who is white.
Twenty-two years after the end of apartheid, black people are now voting on issues and not on race. Mr Trollip, who speaks fluent Xhosa, would not be where he is if the vast majority of black people had not voted for him.
The party of late President Mandela, the icon of the struggle against apartheid, still commands strong support with about 54% of the national vote.
The DA has received about 27%, while the radical Economic Freedom Fighters party - contesting local elections for the first time - has taken about 8%.
The DA's leader, 36-year-old Mmusi Maimane, told reporters: "For far too long, the ANC has governed South Africa with absolute impunity."
He added that the idea that his party - which has its roots in the non-ANC opposition to apartheid - was a white one had been "completely shattered".
The ANC said it would "reflect and introspect where our support has dropped
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