Elsewhere in Europe governing parties in Germany, France and Poland are suffering big losses.
As in the UK, Eurosceptic groups are enjoying their best result at the polls.
So far UKIP has quadrupled its number of MEPs from three to 12.
The party's best showing was in the East Midlands, where it came within 0.3% of beating the Tories and its star candidate Robert Kilroy-Silk was elected to the European parliament.
It also did well in South West and South East of England, where they reached second place behind the Tories.
Mr Kilroy-Silk pledged to get Britain back for the British people.
Asked what he would do when he sits in the European Parliament, Mr Kilroy-Silk said: "Wreck it - expose it for the waste, the corruption and the way it's eroding our independence and our sovereignty.
"Our job is to go there and to say 'look, this is what they do, this is how they waste your money, this how they spend it, this is how it gets corrupted, this is how they all go on this kind of gravy train and spend their time in the restaurants'."
All the results for England, Scotland and Wales have now been announced, with MEPs chosen by proportional representation in each region.
London: Labour and Tories drop a seat; UKIP gain an MEP; Greens hold their seat
North East: Lib Dems take a seat from Labour
Yorkshire and the Humber: Tories lose one seat to UKIP
Wales: No change in share of seats; Plaid Cymru vote dives by 12%
Scotland: Labour, Tories and SNP win two seats; Lib Dems, one
South West: UKIP comes second with 23%, Labour end up in fourth place
South East: Labour and the Tories lose a seat each; UKIP gain an MEP; Greens retain their seat
Eastern region:Labour and Tories both lose a seat; UKIP gets two MEPs; Martin Bell's bid as an independent fails
West Midlands: Tories lose a seat to UKIP
East Midlands: Robert Kilroy-Silk becomes an MEP as the Tories narrowly beat UKIP into second place
North West: Labour and the Tories each drop a seat; Lib Dems and UKIP gain one each; BNP leader fails to get elected
In Scotland, Labour won two seats as did the Tories and the Scottish National Party while the Liberal Democrats won one.
Northern Ireland will wait until later on Monday for its results.
The results in Wales saw no change in the share of MEPs between the parties.
Labour is pleased with its Welsh showing, raising its vote by 1%. Plaid Cymru's vote dived by 12% and the Tories share dropped by 3%.
The overall EU turnout fell to an all-time low at 44.6%.
In the UK, 39% of voters went to the polls - topping the record of 37% for a European election set in 1989.
The projected final outcome puts the Tories on 27%; Labour on 23%, UKIP on 16%, the Lib Dems on 15%, the Greens on 6% and the BNP on 5%.
It is the first time the two largest parties have secured less than half of the vote between them.
The Lib Dems stressed they were the only big party to increase their vote but they face being pushed into fourth place by UKIP and won 3% less of the poll than they did in the last general election.
Tony Blair's official spokesman said the prime minister accepted that the government's position on Europe had to be strongly put.
"But what's important is to have a considered, rational debate about what's
in this country's long-term interest," he said.
"The prime minister recognises that there are those who are sceptical about
the benefits of Europe and therefore the government needs to argue the case."
Health Secretary John Reid told BBC Radio 4's Today programme the results were "disappointing" for Labour, but "disastrous" for the Tories.
Conservative shadow foreign secretary Michael Ancram said: "We are not as high as we would like but we are winning this election."
Voters were clearly telling Tony Blair they did not want him to sign the proposed European constitution, argued Mr Ancram.