Labour's vote in London slumped dramatically, as the party lost a series of key marginals in the capital.
On a mixed night nationally, Labour suffered a disastrous swing of at least five per cent to the Tories in London as opponents of the Iraq war registered their anger with Tony Blair.
The Liberal Democrats demolished the 10,614 majority of former Home Office Minister Barbara Roche in Hornsey and Wood Green in north London with a 14.6 per cent swing. The defeat appears to be attributed to hostility to the war among the liberal middle class and ethnic minority voters.
The war had a disastrous effect on the support of Labour loyalist Oona King, who seemed headed for defeat to George Galloway, of Respect, in Bethnal Green and Bow in east London.
Stephen Twigg, who famously captured Enfield Southgate from Michael Portillo in 1997, himself tasted defeat early today. He was ousted by a Tory councillor, David Burrowes, who won the seat by 8.7 per cent with a majority of 1,747.
Putney, also captured by Labour in Mr Blair's 1997 landslide, also returned to Tory hands. Justine Greening picked up the seat with a 6 per cent swing.
The Tories won back Ilford North, a former stronghold in east London, with a swing of 4.5 per cent, and Wimbledon, where Roger Casale was removed with a swing of 7.2 per cent. Hammersmith also fell into Conservative hands.
After a recount, Labour only scraped home at Battersea with a majority of 163 a seat it had previously held by more than 5,000.
Bob Marshall-Andrews, the left-wing MP for Medway in Kent conceded defeat to the Tories. He blamed the "haemorrhage in Labour votes" to opposition to the war and dislike of Tony Blair.
Helen Clark, the maverick Labour MP for Peterborough, was ousted by the Tories with a swing of nearly seven per cent. The Tories also won the Essex seat of Harwich, and Hemel Hempstead in Hertfordshire.
Nationally, with Labour heading for re-election with a sharply reduced majority, recriminations began over the impact of the Iraq war on the party's vote.
Left-wingers will use the slump in its support to demand a change in leadership. Speculation is bound to revive over how long Tony Blair will remain in Downing Street.
In Wales, the previously rock-solid Labour stronghold of Blaenau Gwent was captured by an Independent Labour candidate and the Liberal Democrats cashed in on opposition to university top-up fees to win Cardiff Central.
Perhaps the most spectacular reverse came in Manchester Withington, a residential area with a high student population. It was captured from Labour by the Liberal Democrats on a 17.3 per cent swing.
Labour was also heading for a poor performance in Scotland.
In Dunbartonshire East, John Lyons lost to Liberal Democrat Jo Swinson who won a majority of 4,061. The Scottish Nationalist Party took Na h-Eileanan An Iar from Labour with a nine per cent swing.
But Labour's Anne Begg beat off a challenge from the Liberal Democrats in Aberdeen South.
The results suggested that disillusioned Labour voters in safe northern constituencies had registered their protest by supporting the Liberal Democrats.
But Labour's vote was holding up in the West Midlands, despite suggestions that the closure of Rover could cost it dear. The party comfortably fought off Tory challenges in two marginal seats in Birmingham Edgbaston and Dudley North.
Jack Straw held his Blackburn seat but saw his 9,249 majority drop to 8,009. The Liberal Democrats more than doubled their vote from 3,264 to 8,608.
John Prescott, the Deputy Prime Minister, declared victory for Labour within five minutes of the polls closing. As a BBC/ITV exit poll forecast the party had been re-elected with a vastly reduced majority, he said: " I always want to see a Labour government and there is going to be a Labour government, there is no doubt about that."
But left-wingers said anger over Iraq had eaten into the party's majority.
Ministers are will blame the collapse on an increase in support for the Liberal Democrats handing dozens of seats to the Tories.
They are also conscious that a dramatically reduced majority could hand leverage in Parliament to Mr Blair's Left-wing critics.
Robin Cook, the former Foreign Secretary, who quit the Cabinet over Iraq, said: "Even I have had people saying to me they can't support Labour ... If it's like that for me, it must be at least as strong for others."
Former Cabinet minister Clare Short, an opponent of the Iraq war, said: "A reduction in the majority but still a reasonable majority that might be good for our government."
Alan Milburn, Labour's chief campaign co-ordinator, said: "The Conservatives ran a pretty nasty right-wing campaign."
To Mr Blair's relief, the Iraq war hardly featured at all during the first half of the campaign. But it dominated the second half after the leaking of the Attorney General's legal advice on the war and the defection of Brian Sedgemore to the Liberal Democrats.
Even when the row over the legality of the war subsided, events on the ground in Iraq moved to the centre of the campaign. At a press conference on Monday, Mr Blair was relieved to face questions on domestic policies rather than Iraq. But then, during the event, news came through that Anthony Wakefield, a British soldier, had been killed in Iraq, the 87th servicemen to die since the conflict began. Mr Blair's words of sympathy became the main story from the news conference.
Labour's top priority was to prevent it becoming a referendum on Mr Blair personally or his record. Party strategists tried to make the election a "choice" between the policies offered by Labour and the Tories.
When Gordon Brown agreed to return to a frontline role, Labour succeeded in putting the economy and public services at the heart of the election. But its message on these issues was drowned out when Iraq burst on to the agenda.
The result was a gruelling final election campaign for Mr Blair, by far the hardest of the three he has fought as Labour leader.
The only crumb of comfort for Labour was that there were few votes in Iraq for the Tories as they supported the war. When Michael Howard tried to exploit it by branding Mr Blair a "liar", the attack backfired. But Labour believe the Iraq issue did help the Liberal Democrats, the only major party to oppose the war.Reuse content