Senate majority leader Harry Reid of Nevada survived a fierce challenge from a candidate backed by the ultra-conservative tea party movement, but was left with a greatly diminished majority.
Republicans scored impressive gains - including winning Mr Obama's old seat in Illinois - but failed to reach the 10-seat gain they needed to control the 100-member chamber.
With Republicans gaining control of the House, Mr Obama will need a Democrat-run Senate to champion his legislative agenda and get his nominees approved. But Democrats will have even more problems mustering the 60 votes needed to overcome Republican delaying tactics and pass legislation.
Republican Senate leader Mitch McConnell hailed his party's gains. "Tonight the voters ensured their message was heard loud and clear," he said.
His task won't be easy, however. Several of his new Republican colleagues are tea party acolytes who have taken delight in working against the party establishment.
But tea party upstarts in Nevada and Delaware who defeated more moderate candidates in Republican primaries proved to be seriously flawed challengers who could be cast as too extreme in a general election.
In Delaware, Christine O'Donnell lost to Democrat Chris Coons. Ms O'Donnell failed to overcome questions about her thin resume, financial problems and history of provocative claims on TV talk shows, like her dabbling in witchcraft as a teenager and her campaign against masturbation.
In Nevada, Mr Reid managed to outlast Sharron Angle, who made a series of gaffes like calling a fund for Gulf of Mexico oil spill victims "a slush fund" and telling Hispanic high school students that "some of you look a little more Asian to me".
Mr Reid, a former boxer, said, "the fight is far from over". He called Tuesday's results a bell signalling "the start of the next round".
Two veteran Democratic senators lost re-election bids: Russell Feingold of Wisconsin and Blanche Lincoln of Arkansas.
West Virginia Governor Joe Manchin held off a wealthy Republican businessman to keep a Democrat in the seat held for half a century by the late Robert C Byrd. And liberal Democratic Senator Barbara Boxer of California won a fourth term despite a spirited challenge from Republican businesswoman Carly Fiorina, the former Hewlett-Packard chief executive.
Tea party champions won high-profile races in Florida and Kentucky, spearheading a likely cadre of libertarian-leaning Republicans who will press party leaders to be more adamant about lower taxes and less government spending.
Rand Paul of Kentucky and Marco Rubio of Florida rocked the Republican party establishment last spring by routing leadership favourites in party primaries. Then they rebuffed Democrats' efforts to paint them as too extreme, winning comfortably on Tuesday. Mr Rubio is the son of Cuban immigrants.
In Utah, tea party-backed Mike Lee won easily after snatching the Republican nomination from Senator Bob Bennett in March.
Meanwhile, a tempestuous three-way race in Alaska lumbered on. Republican Senator Lisa Murkowski was running a rare write-in campaign after losing the Republican primary to another tea partier, Joe Miller, who was backed by former Alaska Governor Sarah Palin. Democrat Scott McAdams was lagging in third place.
Mr Feingold, a three-term Democrat, lost to a Republican newcomer, businessman Ron Johnson, in Wisconsin. Best known for efforts to tighten campaign finance laws, Mr Feingold was the only senator to vote against the so-called Patriot Act passed after the 2001 terrorist attacks, calling it a dangerous infringement of civil liberties.
Ms Lincoln fell to Republican John Boozman in Arkansas, where Mr Obama lost by 20% two years ago.
Republican Pat Toomey won a hard-fought race in Pennsylvania, beating Democrat Joe Sestak. The seat was held by Republican-turned-Democrat Arlen Specter, who Mr Sestak beat in the primary.
Indiana voters sent Republican Dan Coats back to the chamber after a 12-year absence. Mr Coats, who spent a decade in the Senate before stepping down in 1998, defeated Democrat Brad Ellsworth. The seat is being vacated by Democrat Evan Bayh.
In North Dakota, Republican Governor John Hoeven won the Senate seat that retiring Democrat Byron Dorgan held for 18 years.
Republican Mark Kirk captured the Illinois Senate seat once held by the president, dealing an embarrassing blow to Democrats.
Among Republican senators winning re-election were Mike Crapo of Idaho, David Vitter of Louisiana, Charles Grassley of Iowa and John McCain of Arizona. Democratic incumbents re-elected included Ron Wyden of Oregon, Patrick Leahy of Vermont, Kirsten Gillibrand and Charles Schumer, both of New York, and Barbara Mikulski of Maryland.