Supporters of the far-right BNP claimed the party was "on its way" after picking up extra council seats across England.
The British National Party's gains were most dramatic in Barking and Dagenham in east London where it became the second biggest party, seizing 11 of the 13 seats it fought with one ward still to declare. Across England, it picked up 31 seats - a net gain of 26 seats.
Barking and Dagenham is the first council in the country to have the BNP as the second biggest party.
Richard Barnbrook, the BNP's London organiser, who gained one of the seats on the council, said voters had decided the time was right to choose the BNP.
"People now are no longer standing back saying we may think about voting or we dare not say BNP because it is a dirty word," he said.
"They are now standing up and saying now is the time to change. We are voting for the BNP."
Last month Barking Labour MP - and Employment Minister - Margaret Hodge had warned that eight out of 10 white families in her constituency were " tempted" to vote BNP.
Today Labour Party chiefs in the area were considering disciplinary action against her, claiming her comments helped the BNP.
At least one defeated Labour candidate also blamed the Government's recent troubles, including the foreign prisoners controversy and news of Deputy Prime Minister John Prescott's affair, for boosting the BNP.
Away from east London, the BNP's gains were less spectacular.
The party picked up three seats in Stoke-on-Trent, where Labour lost overall control, and three more in Sandwell in the Black Country.
Two of the Sandwell seats were won in the Tipton area, which has a large ethnic minority community and is also home to three Britons who were held at Guantanamo Bay.
BNP members cheered and taunted Labour opponents as the results were announced.
Jubilant winning BNP candidate Simon Smith said: "I am pleased to have won in Tipton because it is a very Anglo-Saxon and traditional area."
Fellow BNP victor Russell Green added: "After tonight's results we can all see that the BNP is on its way.
"It is plain to see that the vast majority of us are sick and tired of the dishonest and self-interested politicians that are ruining our communities and our country."
The BNP claimed a shock win from Labour in Solihull when it won the Chelmsley Wood ward by 19 votes, securing its first seat on the council.
Speaking after the vote, which saw the Conservatives retain control, winning BNP candidate George Morgan said it was a victory for the ordinary working man.
The 55-year-old construction worker, who said he had campaigned on issues of local vandalism and drug abuse, conceded that Labour's problems over the past two weeks had not harmed his cause but stressed that the victory was the result of more than just a protest vote.
Mr Morgan said: "This is Labour's third term and they've done nothing for the country. People are sick and tired of all the lies. We are offering people a choice."
His Labour opponent Nicholas Stephens, who has won seven local elections since he first stood for the party in 1983, laid the blame squarely at the Government's door.
The 48-year-old said: "It's a very disappointing result but the BNP were quite close two years ago so it's not surprising, what with the events going on nationally over the past two weeks.
"You don't have to be a genius to work out why some Labour voters either stayed at home or switched to other parties."
Anti-Fascist campaigners expressed alarm at the BNP's gains.
Holocaust survivor Henry Guterman said: "The BNP have made these gains simply by peddling racist lies which must be challenged and exposed."
He added: "The BNP is a racist organisation which targets Muslims and Jews and all minority communities.
"These results are an insult to all those who perished under the Nazis.
"The decent majority of people must support democracy and see that this does not happen again."
Sabby Dhalu, joint secretary of the Unite Against Fascism campaign group, said: "This result is a disaster for democracy. A neo-nazi organisation has become the official opposition on Barking and Dagenham council and have made several gains around the country.
"Where they have been elected previously, racist violence has soared."
* The Green Party were also were today celebrating gains - winning 29 seats, representing a net gain of 20 across England.Reuse content