Labour's new leader Ed Miliband vowed today to take the party forward as a united team after beating his older brother David by a wafer-thin majority.
The vote was split 50.65% to 49.35% in the race to succeed Gordon Brown.
In a speech immediately after being declared leader, Mr Miliband promised voters that "I get it" about the reasons for Labour's defeat in the May General Election, and understood the need for the party to change.
He said that a "new generation that understands the call to change" had taken charge of Labour today.
Ed Miliband said: "I am proud of the leadership of Tony Blair and Gordon Brown but we lost the election and lost it badly.
"My message to the country is this - I know we lost trust, I know we lost touch, I know we need to change.
"Today, a new generation has taken charge of Labour - a new generation that understands the call to change."
Mr Miliband was named leader in the fourth round of vote-counting at a special leadership conference in Manchester, benefiting from the redistributed votes of eliminated candidates Diane Abbott, Andy Burnham and Ed Balls, after trailing David through the first three rounds.
David won a majority of support from Labour's MPs at Westminster and grassroots activists, but crashed to defeat due to Ed's dominance among the trade unions. Ed finally won the crown thanks to Mr Balls's redistributed votes.
The new leader had campaigned on a platform of "turning the page on New Labour" and his victory will be seen as a move to the left following the Blair/Brown era.
However, he has rejected opponents' characterisation of him as "red Ed" and is likely to continue to court the centre-ground support which took the party to power in 1997.
Mr Miliband now faces the challenge of restoring Labour's fortunes and mounting a credible challenge to the coalition Government led by David Cameron - as well as the more immediate challenge of delivering his first leader's speech to the party's annual conference in Manchester on Tuesday.
In a clear indication of his determination to lead Labour back into power, Ed Miliband told delegates: "I believe in Britain. Today's election turns the page, because a new generation has stepped forward to serve our party, and in time I hope to serve our country.
"Today the work of the new generation begins."
He paid tribute to all of his "outstanding" rivals for the leadership and appeared to indicate that there will be space for all of them as he puts together his team to fight the coalition Government.
Addressing his brother, he said: "David, I love you so much as a brother and I have so much extraordinary respect for the campaign that you ran, the strength and eloquence you have shown...
"We all know how much you have to offer this country in the future."
He said every Tory minister would be "quaking in their boots" at the prospect of facing Mr Balls as their shadow, and said Mr Burnham had "reached people who felt Labour had forgotten them".
To outsider Ms Abbott - the first to be eliminated - he said: "Diane, you were so right to run in this election. You spoke distinct truths to this party that needed to be said and it is important that your voice continues to be heard in the future."
In an appeal for party unity following a four-month campaign that had shown occasional flashes of conflict, he said: "Today, we draw a line under this contest and move forward united as a team."
Ms Abbott said Mr Miliband would make an "excellent" leader and added that she was proud of her campaign despite being the first to be eliminated.
"I ran the course, I said the things I felt needed to be said, and I think now the party is ready to unite behind Ed. I think Ed is going to make a fantastic leader," she said.
Asked if she wanted a place in his shadow cabinet, she said: "I want to have a drink."
Ed Miliband also paid tribute to his partner, Justine Thornton, for the "incredible love and support" she had shown during the campaign.
He told delegates that he had heard "the call of change" as he toured the country for the leadership contest.
And he added: "I get it that people felt they were working long hours without reward and felt we weren't properly on their side.
"I get it that people weren't prejudiced about immigration, people felt anxious and insecure about their wages and conditions and housing. I get it and I understand the need to change.
"I get it also that people worried about the next generation - people thought 'Are my kids going to get on to the housing ladder? Are they going to leave university with high levels of personal debt?' I get it and I understand the need to change.
"I get it also that, whatever your view on the Iraq War, it led to an appalling loss of trust for us. I know we didn't always speak to your hopes, your dreams and address your fears and uncertainties. I know we have to change."
He added: "I have to unify this party and I will. I am going to show that I understand the need to change.
"We have to inspire people with our vision of the good society.
"Let me tell you what I believe: I believe we must reduce the deficit but I believe we must do so much more than that to have an economy working in the interest of the hard-working people of this country.
"I believe this country is too unequal and the gap between rich and poor doesn't just harm the poor it harms us all and it is something Government must tackle.
"I do believe that there are too many people in this country locked out of opportunity by accident of birth or background and I believe we must have a society that upholds and protects things beyond the bottom line: family, community, time, the environment - all things that matter to us.
"I believe also we need a different kind of politics in this country and I will oppose the coalition Government when they are doing the wrong thing but I will support them when they are doing the right thing. That is responsible politics and it's the politics people in this country want.
"I recognise above all the scale of the journey on which we must embark to win back your trust. I recognise it won't be easy. But be in no doubt - my leadership will be devoted to securing the opportunity for Labour to serve the country again.
"Not power for its own sake, but to make this country the more prosperous, more equal, fair, just society we can be."
Mr Balls spoke of the moment candidates were told the result.
He said: "We found out just before hand. It was tense for all of us.
"We were all stood there, the five of us, with Harriet Harman and Ray Collins, the general secretary, and Ray said 'You have all done brilliantly. Ed Miliband, you have won.'
"In a sense it was a relief for everyone to know the final result and David and Ed hugged straight away.
"We saw the numbers afterwards but the first we knew was Ed.
"It was really close and only finally, in the last round, did Ed win. But he won the election and fought a brilliant campaign - all around the country people have talked about how well he did.
"We have got to come together now and say 'This is our leader, this is the man we have got to unite behind.'
"David was ahead for the beginning but every round Ed caught up, and he caught up right across the three sections, and just got there in the end.
"He is now our leader, he has done a brilliant job, he has run a great campaign.
"He needs the time and the space to make his decisions. I will back him 100%. I am sure everyone else wants to do that as well."
Mr Burnham was greeted by his family, including his two young children, when he left the stage after the drama of the election result, pledging to work "100%" for the new leader.
The shadow health secretary said: "Today is a great day in the history of the Labour Party - a new generation has come to the fore and is ready to lead Labour forward.
"Ed has earned the right to lead the party after a really tough contest. He won because he drew support from across the party and he was quick to set out his very clear vision of the future.
"We will now unite behind Ed and concentrate all our efforts in making sure this coalition is a one-term Government."
Mr Burnham said he believed his message had got through to Labour members during the past few months and he was "delighted" with the level of support he received."
Asked about David Miliband, he said: "David is a towering talent and a great intellect."
Ed Miliband received a total of 175,519 votes compared with his brother's 147,220, which his supporters said proved the level of backing he received.
"The result proves he can reach out beyond the Westminster bubble, to party activists, and to other Labour supporters, which has to be a good thing," said one of his campaign team.
Within minutes of leaving the stage, Ed Miliband told his 25,000 followers on micro-blogging website Twitter: "I'm deeply honoured and proud to have been elected leader of the Labour Party. Thank you. Now the work of a new generation begins."
Mr Burnham said: "Ed Miliband is a worthy winner and has my full support as a new generation takes Labour forward and makes this coalition a one-term Government.
"What this contest has shown is that there is no ideological divide. Strong and united, Labour's first task now is to take the fight to this coalition Government, to provide a credible and principled alternative to these cuts and to win back the trust and support of the British people."
Speaking to delegates moments before the leadership results were announced, Gordon Brown promised his "full, unequivocal and tireless support" to his successor.
In his first appearance at a major Labour event since stepping down as leader in May, the former prime minister said: "In all the months and years to come, you will not find me - not now, not ever - doing anything other than supporting the Labour team."
Mr Miliband's victory was warmly welcomed by the unions, whose support he had during the campaign and whose votes were crucial to his success.
Tony Woodley, joint leader of Britain's biggest union Unite, said today's result was a "clear sign that the party wants change" and called on Labour to unite behind the new leadership.
Unison general secretary Dave Prentis: "Under Ed's leadership, Labour must offer an alternative economic strategy, promoting growth and recovery, together with fairness. This means protecting the poor, the sick and the vulnerable from the fall-out of this banker's recession."
Former Labour cabinet minister David Blunkett said the new leader and his brother had to form a united front.
He said: "We've never seen anything quite like what we've had, with two brothers neck and neck.
"These are brothers. They're blood brothers. They can't afford to fall out in the way we had with Tony and Gordon, and neither can we."
And leading Blairite Tessa Jowell told Sky News: "I was supporting David very strongly, so obviously personally I feel disappointment.
"But the point is that it has been a long campaign, all the candidates have engaged with a huge number of Labour Party members, and the important thing is, now, everybody in the hall, whoever they voted for, will rally behind Ed as the new leader of the Labour Party."
Liberal Democrat deputy leader Simon Hughes sent his congratulations to Mr Miliband, and welcomed his announcement that he was ready to support the coalition Government if it was doing "the right thing". He urged the new Labour leader to support the cross-party campaign for electoral reform ahead of next year's referendum on the Alternative Vote system for Westminster elections.
But he added: "The country has a tough time ahead and it will be vital that he wakes up to the challenge that Britain faces. As leader he must recognise that his party can no longer remain head-in-the-sand deficit-deniers."
Ed Miliband joined Labour Party officials in a backstage room at the huge Manchester Central conference centre after becoming the party's new leader, drinking a cup of tea.
He is due to attend meetings and receptions later this evening.
Prime Minister David Cameron said: "Congratulations to Ed Miliband.
"I was Leader of the Opposition for four years and know what a demanding but important job it is. I wish him and his family well."
Ed Miliband's partner, Ms Thornton, who is pregnant with the couple's second child, was inside the conference hall to hear the drama unfold.
She travelled to Manchester today and will return to London tomorrow before going back to Manchester to hear Mr Miliband deliver his keynote speech on Tuesday.
She is expecting her baby, another boy, in November.
There was no immediate public reaction from David Miliband but in an email to some supporters, he said: "I am moved and honoured by your support and proud of our campaign together. I passionately want Ed to have a united party."
The message was read out by Labour former minister Keith Vaz during an interview with Sky News.
"That is exactly what David Miliband wants," said Mr Vaz.