British Prime Minister Tony Blair's majority has been sharply cut by a Conservative revival and a protest vote over the Iraq war.
His Labour Party has won a third successive general election victory for the first time in its history, but also suffered a string of surprise defeats.
The results showed that many people who voted Labour in 1997 and 2001 had deserted the party to give Blair a "bloody nose" over the Iraq war, which became the dominant issue in the second half of the campaign.
An exit poll for BBC and ITV immediately after polls closed forecast a Labour majority of 66 seats.
The survey of 19,800 voters for the BBC and ITV suggested Labour would win 356 seats, a drop of 56 since the 2001 election; the Tories 209 seats, a gain of 43, and the Liberal Democrats 53 seats, up two.
The poll by NOP and Mori gave Labour 37 per cent of the votes cast (down four points on the last election), the Tories up one point on 33 per cent and the Liberal Democrats 22 per cent (up four points).
There were signs that the turnout was higher than the 59 per cent at the 2001 election.
Labour suffered a spectacular defeat in Hornsey and Wood Green, north London, where the war was a big issue, at the hands of the Liberal Democrats, who achieved a huge 14.6 per cent swing.
In a clear sign of an "Iraq effect", Labour performed much worse in London than in other regions. But Michael Howard's party failed to repeat its revival in London and the southeast in the Midlands and north.
If it had done so, the Conservatives would have come close to wiping out Labour's overall majority.
Blair suffered a double squeeze as the Liberal Democrats reaped the benefit of anti-war protest votes.
Defeated Labour candidates were quick to blame Blair's unpopularity and the war for their demise.
Bob Marshall-Andrews, conceding defeat in Medway, Kent, said: "It is impossible not to draw the conclusion that the war and the Prime Minister have caused a serious haemorrhage in Labour votes."
He called for a change of leadership "sooner rather than later".
After regaining his Sedgefield seat, Blair said: "I know Iraq has been a divisive issue in this country, but I hope now we can unite again and look to the future.
"The British people wanted the return of a Labour Government with a reduced majority. We have to respond to that sensibly and wisely and responsibly."
Gordon Brown, the Chancellor of the Exchequer, acknowledged that Labour had suffered a protest vote.
He said: "I promise we will listen and learn so we can serve our country and our community even better in the years to come."
The sharp drop in Blair's majority will raise a question-mark over whether he can remain in Downing St for anything like the "full term" he wishes to serve before standing down.
He will face calls from within the party for an early handover of power to Brown, whose allies believe Labour would have suffered bigger losses if the Chancellor had not played a pivotal role in the campaign.
His smaller majority will also provoke doubts over whether he can secure the passage of radical public service reforms in the face of opposition from left-wing Labour MPs. Cabinet ministers hailed a historic victory for Labour. Claiming victory minutes after the polls closed, Deputy Prime Minister John Prescott said: "What's clear is Labour is going to be the next Government."
Lord Neil Kinnock, the former Labour leader, said: "In a third successive election, to get what by any standards is a very substantial majority, is a token of the resilience of Labour and Tony Blair and indeed Gordon Brown and is a secure majority, a very secure majority."
He conceded that Labour's winning margin had been cut by Blair's decision to go to war in Iraq.
"I think what has happened is a reward to Labour for extremely good economic stewardship and strong support for the vital services, health and education particularly, mitigated by significant concern about the war in Iraq and its consequences."
Although leading Tories admitted early that the party could not win, they hoped to make enough progress to secure a platform from which to win the next general election.
Liam Fox, the Tories' co-chairman, welcomed the swing to his party in the early results.
"It is clear that the public want to cut Tony Blair down to size and make him more accountable," he said.
Boris Johnson, the Tory candidate in Henley, west London, said: "What we are now seeing, I think is the slow, sad political extinction of Tony Blair."
* Quotes from election night in the UK:
"It seems as if it is clear that the British people wanted the return of a Labour Government but with a reduced majority. I know Iraq has been a divisive issue in this country but I hope we now can unite again and look to the future."
- Tony Blair, victorious British Prime Minister.
"What has happened on this election day marks a significant step towards our recovery."
- Michael Howard, Conservative Party leader.
"Mr Blair, this is for Iraq. This defeat that you have suffered and all the other defeats that New Labour has suffered this evening is for Iraq. All the people you killed, all the lies you told, have come back to haunt you. And the best thing the Labour Party could do is sack you tomorrow morning."
- George Galloway, former Labour MP expelled from the party, who won re-election as an independent.
"Fighting this campaign has not been an easy task for me but I had to do it for my son. There are lessons to be learned and I hope . . . the Prime Minister one day will say sorry."
- Reg Keys, father of a young soldier killed in Iraq, who stood in Blair's Sedgefield constituency.
- INDEPENDENT
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