Though he tried to look magnanimous, it was the billionaire media mogul's first-ever defeat within the party he founded and which has achieved electoral success largely through his personal appeal.
Berlusconi's retreat bestows a measure of stability on Letta's 5-month-old left-right coalition which won confidence votes in both houses and faces the daunting task of trying to revive Italy's economy. And while Berlusconi was left bruised and battered, political analysts argue he is not yet out of the picture.
"Berlusconi is not finished," said Roberto D'Alimonte of Rome's LUISS University. "This is another step toward the end, but it is not the end yet. The end will come with a major electoral defeat.
"He has great resources. He has media resources, financial resources, the resources of the 6 or 7 million voters who will follow him down the abyss. That is why he cannot be counted out, even with his options being closed."
Whether Berlusconi can ever again face the electorate is far from certain because his judicial woes are narrowing his ability to maneuver.
His appeals over his tax fraud conviction were exhausted this summer, and he now faces a prison term, the loss of his Senate seat and a political ban that will bar him from running in new elections.
Berlusconi's theatrics pushing for the government to fall, then saving it at the last minute are a sign of the nervousness provoked by his judicial woes, said Giuseppe Orsina, a political scientist who this summer published a book about Berlusconi's influence in Italy.
"This is another paradox," Orsina said. "It wasn't in his interest to make the government fall, from the point of view of his companies, and it was not politically rational. It was rational in the protection of his honor ... It was an act of political pride."
Despite being weakened, Orsina said Berlusconi "remains a protagonist in the political life. Today he suffered a defeat that is the first in the history of his party."
A Senate committee is due to vote in the coming days on whether to recommend stripping Berlusconi of his seat following his conviction of tax fraud and its four-year sentence. A 2012 law bans anyone sentenced to more than two years in prison from holding or running for public office for six years.
Separately, a Milan appeals court will decide later this month on the exact length of a political ban, from one to three years, that was included alongside the four-year sentence in the tax fraud case.
Berlusconi also must decide if he wants to serve his sentence reduced to one year due to a general amnesty extended to first-time offenders under house arrest or by performing social services, a choice that will impact his political reach.
Beyond that, Berlusconi is appealing his seven-year sentence on a conviction of paying a minor for sex and forcing public officials to cover it up. That sentence, if confirmed, carries a lifetime political ban.
Naples prosecutors also are preparing charges against him for allegedly paying a lawmaker to pull support from a former government of ex-Premier Romano Prodi, a move that seriously weakened that center-left government.
Berlusconi has claimed his innocence in all these cases, and alleged that he is being persecuted by elements in the judiciary.
D'Alimonte said it is a foregone conclusion that Berlusconi will lose his seat, sooner or later, due to his legal problems. "He would have lost his seat even without the government crisis, so nothing has changed," the analyst said.
It remains to be seen if the rift in Berlusconi's People of Freedom party that emerged over the confidence vote will heal or lead to a permanent fracture.
Dissident lawmakers in the party have announced they will try to form a new parliamentary group, while Berlusconi has previously said he will relaunch the original Forza Italia party that brought him to power.
The confidence vote delays the threat of new elections, at least for now: Analysts don't expect the center-right to stop challenging the center-left on policy.
Meanwhile, with Berlusconi unlikely to be running in elections any time soon, his daughter Marina is being floated as a likely political successor.
"Marina can be competitive," D'Alimonte said. "If Marina steps in, then Berlusconi is still in the fray. That is why I say only an election can put an end to the Berlusconi saga."
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Associated Press writer Nicole Winfield contributed to this report from Rome.
