The New Democrats came within a whisker of holding the balance of power in a Liberal minority government.
The NDP gained 15.7 per cent of the popular vote and earned 19 seats, up from the 14 it had at dissolution.
NDP leader Jack Layton will represent the New Democrats in the House of Commons after winning a competitive battle in his Toronto-Danforth riding against Liberal rival Dennis Mills.
In his victory speech, Mr. Layton praised the 16-year Liberal MP for a "well-fought campaign," and thanked him "for his many years of service to Toronto and Canada."
Mr. Layton has been credited with bringing new energy to the party not seen since the days of Ed Broadbent (Mr. Broadbent returned for this election as an NDP candidate in Ottawa Centre, where he also won a seat.)
During campaigning, Mr. Layton urged progressive voters to follow their hearts and back the New Democrats at the ballot box instead of defecting to the Liberals to block a potential Conservative victory.
But the rookie party leader also made several moves along the way that hurt the party. He blamed Toronto homeless deaths on Paul Martin and the social services cuts he made as finance minister, proposed an inheritance tax that could hit baby boomers and said he would abolish the Clarity Act on Quebec separation legislation popular with federalists in English-speaking Canada.
Olivia Chow, Mr. Layton's wife and another of the party's stars, lost in a tough race against Liberal Tony Ianno who has held Toronto's Trinity-Spadina riding since 1993.
The NDP captured a total of seven seats in Ontario, of which one belonged to a cabinet minister. In Hamilton Centre, David Christopherson ousted Revenue Minister Stan Keyes by a wide margin.
In Atlantic Canada, the NDP took three seats, down one from their 2000 showing.
Alexa McDonough won her in Halifax riding and Peter Stoffer took Sackville-Eastern Shore in Nova Scotia, and Yvon Godin handily won his seat in New Brunswick's Acadie-Bathurst with 54 per cent of the vote.
The region is heavily populated by working-class people with strong connections to organized labour and would seem a natural breeding ground for the NDP. But the party has never really taken off outside Nova Scotia, where the party formerly held three of its 14 seats in the House.
Still, the party gained a higher percentage of the popular vote in Atlantic Canada than it did during the 2000 election.
In British Columbia, the party took five seats, up from two at dissolution. Libby Davies more than doubled the votes of her closest rival and a member of Mr. Martin's dream-team in the province, Shirley Chan, to win Vancouver East with nearly 57 per cent of the vote.
After entering the Croatian Cultural Centre in her riding to applause, Ms. Davies said victory was sweet given the bitter mudslinging that characterized the campaign in a riding that includes Canada's poorest postal code, the Downtown Eastside.
"I think people were totally fed up with the Liberals. They were fed up with the local candidate and the kind of negative campaign that was run," she said.
The NDP gained four seats in Manitoba, including Winnipeg North, where finance critic, Judy Wasylycia Leis, held onto her riding.