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Labour now has a formidable 419 seats (including the speaker) - the largest the party has ever taken. The Conservatives took just 165, their worst performance since 1906.
Tony Blair - at 43 the youngest British prime minister this century - promised he would deliver "unity and purpose for the future".
John Major has resigned as Conservative leader, saying "When the curtain falls it's time to get off the stage and that is what I propose to do."
Many prominent Tories lost their seats. They included:
Neil Hamilton, the former minister currently under investigation in the "cash-for-questions" affair, was routed by former BBC journalist Martin Bell, campaigning on an anti-sleaze platform.
Liberal Democrat leader Paddy Ashdown was triumphant on a day that saw his party win 46 seats, the best achievement for a third party in more than 60 years
This afternoon Mr Blair announced the leading members of his first cabinet.
Gordon Brown is chancellor of the exchequer, Robin Cook is foreign secretary and Jack Straw, home secretary.
John Prescott will head a "super-ministry", combining parts of the departments of environment and transport, and will also act as deputy prime minister.
Many Tories blame their disastrous performance on internal divisions over whether to join the single European currency and a lengthy election campaign.
Labour held an election party last night at the Royal Festival Hall.
Tony Blair managed to snatch a few hours sleep before emerging from his Islington home just before midday with his wife Cherie to be greeted by neighbours and well-wishers.
Crowds lined the route waving flags as he was driven to Buckingham Palace for an audience with the Queen.
At around 1300BST he arrived at Downing Street packed with party workers and their children cheering and reaching out to shake Mr Blair's hand.
He told them: "For 18 years - 18 long years - my party has been in opposition. It could only say, it could not do.
"Today, we are charged with the deep responsibility of government. Today, enough of talking - it is time now to do."
In Context
After a heated contest, William Hague took the Conservative reins but he failed to boost the Tories' fortunes and Labour won again in 2001. Mr Hague resigned and Iain Duncan-Smith beat off Ken Clarke's challenge to become Conservative leader.
The Liberal Democrats under Paddy Ashdown had close links with the government and formed a joint cabinet committee. Mr Ashdown stepped down as leader in 1999 and Charles Kennedy took the helm.
The "New Labour" government has been trying to raise standards in primary and secondary education, reforming the health service, social security system and the House of Lords.
It also devolved power to Scotland, Wales, and Northern Ireland, and created an elected mayor for London.
On 5 May 2005, Mr Blair secured a historic third term for Labour, but with a drastically reduced majority.
Election facts
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