Grybauskaite scored 55.5 per cent support against 42.6 for Balcytis with one third of the vote counted in the Baltic state, which is both an EU and NATO member and is currently dominated by security concerns over a resurgent Russia.
Having cultivated a reputation for Thatcher-esque toughness, Grybauskaite had been tipped to win a second five-year term, with many who remember Soviet times seeing her as the best choice to steer the country through Europe's worst standoff with Moscow since the Cold War.
Running as an independent, Grybauskaite has focussed largely on national security, while Baclytis has campaigned on bread and butter issues as Lithuania gears up to join the eurozone in January.
No opinion polls were issued ahead of round two, which coincides with elections to the European Parliament. Turnout is expected to be around 50 per cent.
Analysts say Balcytis would gain ground by absorbing the electorates of the five candidates eliminated in round one, but a majority still predict a Grybauskaite victory.