The decision was first announced late on Sunday in a lengthy statement on the party's website after a meeting of party officials.
“It wouldn't be right vis-a-vis the great champions of the party to let the party wither away,” the party's leadership wrote.
Founded in 2008, the party only managed to win one seat in its short history: a councillor in 2010 in the small southwestern town of Grästorp, who later had to step down because he lived in a neighbouring municipality.
Four years later, despite fielding more candidates and having greater financial resources, the national election of 2014 was a “serious setback” for the party, according to the statement, as it only managed to garner 4,189 votes (0.07 percent) compared with the 10,000 targeted.
Although it carefully avoided any references to Nazism, the party — which called for “a Swedish Sweden” and was openly xenophobic — had its roots in a group called the National Socialist Front.
It criticised the anti-immigrant Sweden Democrats, Sweden's third largest party, for being too accommodating on immigration.
Neo-Nazis have a long history in Sweden and other groups include the Swedish Resistance Movement.
“The party of the Swedes has been one of the biggest organisers on that side. Now we will probably see new actors and groups,” the editor of anti-racist magazine Expo, Anders Dalsbro, told news agency TT.
Earlier this year a report by Expo concluded that while Sweden's neo-Nazi organizations are declining in numbers, but their activity is growing in intensity.