Liberal Democrat leader Sir Menzies Campbell has said the local elections, in which his party failed to gain many seats, represent "consolidation".
The Lib Dems won a greater share of the vote than Labour but this only translated into two extra councillors.
Sir Menzies said the elections had not been a "test" of his leadership but of the party in general.
The Lib Dems took control of Richmond on Thames from the Tories but lost control of Winchester and Islington.
The BBC projects the party's national vote share at 27%, with the Tories on 40% and Labour 26%.
The English local elections were the first big test for the Lib Dems since Sir Menzies succeeded Charles Kennedy as leader.
Sir Menzies said: "There is no doubt that our results have been mixed but I am not in any way down-hearted by these results.
"This wasn't a test for me; it was a test for the party after the difficulties of the earlier part of this year. I think we have come through this test."
The party's president, Simon Hughes, said the Lib Dems were continuing to make progress.
"Compared with five, 10, 15, 20 years ago, where we were not a presence in Sheffield, in Newcastle, in Birmingham, in Manchester - in all the big places... we have been building up solidly and in terms of the numbers of councillors... we're not far behind Labour in terms of councillors elected," he said.
The Mark Oaten sex scandal has been blamed for lost seats in Winchester, where the Tories have taken control.
The Lib Dems took South Lakeland District Council, in Lancashire, from no overall control, after gaining six Labour seats, two Conservative and one Independent.
It is the first time since the council was established in 1974 that a single political party has held control.
In St Albans, Hertfordshire, the Lib Dems narrowly won the council, which previously had no overall control, by gaining two seats.
But Islington in north London has been lost by the Liberal Democrats to no overall control by losing 12 seats to Labour.
And Milton Keynes has also been lost to no overall control, with the gains going to the Tories.
In Norwich Council's Lakenham ward Labour gained the seat from the Lib Dems by 15 votes, following a recount.
Lakenham forms part of Home Secretary Charles Clarke's Norwich South constituency.
Liberal Democrat chief executive Lord Rennard rejected the idea that it had been a bad night for the party.
He told the BBC: "We consider it a good morning actually, to push the Labour Party into third place nationally is not something we'd expected a few years ago.
"We made some extremely good gains and very few losses so actually we're really rather pleased this morning."