Brokeback Mountain is leading the field at the 78th Academy Awards with eight nominations, including best film.
Brokeback Mountain picked up a slew of pre-Oscars awards
Ang Lee has a best director nomination for the cowboy romance, building on his Golden Globe success, while its star Heath Ledger is up for best actor.
Fellow best film nominees are Good Night, and Good Luck, Crash, Capote and Steven Spielberg's Munich.
The Academy Awards ceremony will take place in Los Angeles at the Kodak Theatre in Hollywood on 5 March.
Bookmakers William Hill have made Brokeback Mountain their hottest favourite in history to win best film, at odds of 1/8. Director Lee is virtually unbeatable with even shorter odds of 1/20.
Lee said of his film on Tuesday: "I thought it was a small work of love. I never thought it would play like this."
Crash, Good Night, and Good Luck, and Memoirs of a Geisha - adapted from the best-selling book by Arthur Golden - all share six nominations.
This year's Oscar race is the most open field since 2000, when frontrunner American Beauty also had just eight nominations.
Brokeback Mountain - 8
Crash - 6
Good Night, and Good Luck - 6
Memoirs of a Geisha - 6
Capote - 5
Munich - 5
Walk the Line - 5
Pride and Prejudice - 4
The Constant Gardener - 4
King Kong - 4
The nominations are seen as a triumph for independent film over big budget blockbusters, with only Munich having a budget over $15m (£8.4m) out of the five best film nominees.
Three of the best director nominees are all relative newcomers, in a year dominated by new faces.
Bennett Miller (Capote), George Clooney (Good Night, and Good Luck) and Paul Haggis (Crash) face two of the most respected directors in the industry - Lee, and Spielberg, nominated for political thriller Munich.
Clooney picked up three nominations in total, two for Good Night, and Good Luck (best director and original screenplay) and one for Syriana, for best supporting actor.
British actresses Dame Judi Dench and Keira Knightley will go head-to-head for the best actress Oscar, for Mrs Henderson Presents and Pride and Prejudice respectively.
Dame Judi is up for her fifth Oscar, while it is Knightley's first, for her role as Elizabeth Bennet.
Dame Judi, 71, said she was "thrilled", adding: "I'm so happy to be nominated for something I loved filming every single day."
The pair face competition from Walk the Line's Reese Witherspoon, for her role as June Carter Cash, Charlize Theron for North Country, and Desperate Housewives' Felicity Huffman, who starred in Transamerica.
In the best actor category, Ledger is up against Terrence Howard for Hustle and Flow, David Strathairn for Good Night, and Good Luck, Capote's Philip Seymour Hoffman, and Joaquin Phoenix, who plays Johnny Cash in Walk the Line.
British actor Ralph Fiennes missed out on an Oscar nomination for The Constant Gardener, but co-star Rachel Weisz is in the running for best supporting actress.
"It is wonderful as a Brit to be honoured in this arena," said Weisz, 34. "I'm just happy that the film and the issues raised in it are being recognised."
Gromit is the brainchild of creator Nick Park
In another British triumph, the first feature-length Wallace and Gromit film, The Curse of the Were-Rabbit, vies with Tim Burton's Corpse Bride and Howl's Moving Castle for the best animated film award.
Wallace and Gromit creator Nick Park, who has already won three Oscars, said he, and co-director Steve Box were "over the moon".
Italy's Don't Tell (La Bestia nel Cuore), France's Joyeux Noel, Germany's Sophie Scholl - The Final Days (Die letzen Tage - Sophie Scholl) and South Africa's Tsotsi are joined by Paradise Now, from the Palestinian territories, in competition for the best foreign language film.