Yukio Hatoyama: "The nation has voted for regime change"
Japan's opposition leader Yukio Hatoyama has hailed an election "revolution", with exit polls suggesting a massive win for his party.
The Democratic Party of Japan (DPJ) won 300 seats in the 480-seat lower house, ending 50 years of almost unbroken rule by the LDP, NHK TV predicted.
Mr Hatoyama, 62, said people were "fed up" with the governing party.
Prime Minister Taro Aso said that he took responsibility for the defeat and would resign as head of the LDP.
Japan is suffering record unemployment and its economy is struggling to emerge from a bruising recession.
The DPJ has said it will shift the focus of government from supporting corporations to helping consumers and workers.
The White House has already said it hopes to forge a "strong alliance" with the incoming government.
Mr Hatoyama, who is almost certain to lead the next government, is the wealthy grandson of the founder of Bridgestone tyres. His other grandfather was a former LDP prime minister.
He said after polls closed: "We will not be arrogant and we will listen to the people.
"The people are angry with politics now and the ruling coalition. We felt a great sense of people wanting change."
Mr Hatoyama, who is expected to announce a transition team on Monday, has promised to boost welfare and reform the bureaucracy.
He also vowed on Sunday to strive to resolve a long-standing territorial feud with Russia.
The White House called the election "historic", adding: "We are confident that the strong US-Japan alliance and the close partnership between our two countries will continue to flourish."
Alastair Leithead, BBC News, Tokyo
It's a massive swing. What the opposition can do now they are coming into power, and untested, is deal with the serious problem revolving around the economy and the recession.
Unemployment is at the highest level it ever has been and by the end of next year Japan will no longer be the second biggest economy in the world - that will be China.
Almost a third of the people here will be pensioners and therefore there will be fewer taxes coming in, more money going out.
It's a very difficult position that Japan is in. People have voted out a party that was in power almost without break for 50 years.
They are now looking to a new and inexperienced government to try and deal with some difficult challenges.
However, Mr Hatoyama has indicated he wants Japan to distance itself from US diplomatic policies and be more independent.
The BBC's Roland Buerk in Tokyo says Mr Hatoyama will have little time to savour his victory.
Elections to the less powerful upper house are due next year, he says, and the DPJ will want to retain the control it gained there in 2007 to push through its agenda.
Sunday's exit polls suggested a stunning reversal of fortune for Japan's political parties, reducing the LDP to a rump in parliament, correspondents say.
Mr Aso's party has governed Japan for all but 11 months since 1955.
Official results are expected early on Monday, but Mr Aso conceded the LDP was heading for a big defeat.
"These results are very severe," he said at party headquarters. "There has been a deep dissatisfaction with our party."
The LDP's Kotaro Tamura said: "We made too many mistakes. Very crucial mistakes... we changed prime minister three times without holding an election."
Taro Aso said the results were "very severe"
Turnout in Sunday's election was reportedly just under 50%, slightly down from 2005 when elections saw the charismatic Junichiro Koizumi's LDP elected with a significant majority.
Officials said the turnout held up despite a combination of typhoon-triggered rainfall around Tokyo and a government warning that a swine flu epidemic was under way.
Japanese broadcaster NHK announced its exit polls moments after voting ended at 2000 (1100 GMT), saying they showed a major power shift in Japan.
The LDP had 303 seats in the outgoing parliament, compared to the DPJ's 112.
The projections were based on exit polls of roughly 400,000 voters.