"President Bush said today that as leader of the Republican Party he shoulders some of the blame for the large losses his party suffered yesterday, when Democrats easily recaptured the House and neared control of the Senate , after a bitter midterm election campaign dominated by war, scandal and questions about Bush's leadership.

'While the ballots are still being counted in the Senate, it's clear the Democrat Party had a good night last night. And I congratulate them on their victories,' Bush said at a press conference at the White House. The president also announced that Defense Secretary Donald Rumsfeld was stepping down and would be replaced by former CIA director Robert Gates. Democratic leaders have called for Rumsfeld, the architect of the increasingly unpopular war in Iraq, to resign.

In response to a question, Bush said Vice President Cheney, who has also been criticized by Democrats, has his full confidence.

In Montana, where ballots still had to be counted this morning, Democratic challenger Jon Tester defeated Republican incumbent Sen. Conrad Burns, although Burns did not concede defeat or say if he would seek a recount. Tester held a 3,000 vote lead over Burns, with a few hundred provisional ballots and results from one small county outstanding. That left the Democrats with 50 seats and the Republicans with 49, although Vice President Cheney has a vote that would bring the GOP total to 50.

So the result in Montana left the balance of power in the Senate resting on the outcome of the race in Virginia, where former Navy secretary James Webb (D) was ahead of Virginia Sen. George Allen (R) by about 7,000 votes. Webb claimed victory but Allen declined to concede. With a recount possible, a final outcome could take weeks.

'The message yesterday was clear: The American people want their leaders in Washington to set aside partisan differences, conduct ourselves in an ethical manner, and work together to address the challenges facing our nation,' Bush said.

'I'm obviously disappointed with the outcome of the election and, as the head of the Republican Party, I share a large part of the responsibility,' Bush said. But the president cautioned that a change in the congressional leadership does not necessarily mean a change in his Iraq policy and stressed that the United States would remain focused in its efforts in Iraq and against terror organizations elsewhere.

'I know there's a lot of speculation on what the election means for the battle we're waging in Iraq. I recognize that many Americans voted last night to register their displeasure with the lack of progress being made there,' Bush said. 'Yet, I also believe most Americans and leaders here in Washington from both political parties understand we cannot accept defeat. In the coming days and weeks, I and members of my national security team will meet with the members of both parties to brief them on latest developments and listen to their views about the way forward.'

Many Democrats had made the administration's Iraq policy a central theme in their campaigns. Today, Rep. Nancy Pelosi, the Democratic leader in the House who is poised to become the first female speaker , reiterated her party's interest in influencing Iraq policy and called again for Bush to replace Rumsfeld. She said Bush called her this morning and she will go to the White House tomorrow to meet with him.

But she, too, stressed a conciliatory attitude. 'We are prepared to govern in a bipartisan way,' she said.

In the House, Democrats picked up at least 27 Republican-held seats without losing any of their own. Several other House races remained too close to call.

In the Senate, the Democrats also gained seats in Missouri, Ohio, Pennsylvania and Rhode Island.

Democrats also scored heavily in gubernatorial races, picking up at least seven states to claim a majority nationally.

The upheaval in the House and the changing balance in the Senate signaled a dramatic power shift in Washington that will alter the final two years of Bush's presidency, with resurgent Democrats expected to challenge the administration on its domestic priorities and the Iraq war.

Bush -- who recently equated a vote for Democrats as a vote for terrorists -- telephoned Pelosi and other victorious Democrats early this morning to offer congratulations, invite them to lunch and offer a message that press secretary Tony Snow characterized as 'we look forward to working with you.'

Pelosi joined other Democratic leaders at a boisterous rally just after midnight and scheduled a news briefing for noon today. She and others in her party hailed the election results as a public demand for a new direction.

'Today the American people voted for change and they voted for Democrats to take our country in a new direction, and that is exactly what we intend to do,' she said. 'The American people voted for a new direction to restore civility and bipartisanship in Washington, D.C., and Democrats promise to work together in a bipartisan way for all Americans.'

Rep. Thomas M. Davis III (R-Va.), who is part of the Republican House leadership, warned that Bush would face a much more combative environment than during the past six years, when the GOP maintained a majority in the House.

'They're going to be setting the agenda. He's going to be reacting to it,' Davis said in an interview on Washington Post Radio. 'He's going to be reacting to subpoenas flying, investigations. If we tended to underinvestigate, I think you'll see Democrats tend to overinvestigate.'

Davis said the White House should shoulder much of the responsibility for the Republican losses, noting that his own normally wide margin of victory had been whittled to about 12 percentage points and saying the Democratic takeover in the House 'could have been worse.'

'Republicans margins were down all over the country,' Davis said. ' . . . Most of this was driven from the White House, not from the congressional leadership.'

Republicans lost almost regardless of their ideology or support for the president. Conservative Sen. Rick Santorum (R-Pa.), the most vulnerable incumbent throughout the year, was the first senator to fall, losing to state Treasurer Robert P. Casey Jr. Not long after, Ohio Sen. Mike DeWine (R), known for working across party lines, fell to Rep. Sherrod Brown after being caught up in the undertow of state GOP scandals, economic woes and the impact of the Iraq war on Buckeye State voters.

Then came Rhode Island, where Sen. Lincoln D. Chafee, the son of a beloved former senator and one of the most liberal Republicans in Washington, lost to former attorney general Sheldon Whitehouse in a state where Bush's popularity is among the lowest in the nation.

Early this morning, Missouri state Auditor Claire McCaskill (D) defeated Sen. James M. Talent in one of the year's closest races.

But in Tennessee, Republicans claimed one of the other premier races when former Chattanooga mayor Bob Corker (R) defeated Rep. Harold E. Ford Jr. in the election to succeed retiring Senate Majority Leader Bill Frist (R).

In one of the most-watched Senate races, Sen. Joseph I. Lieberman of Connecticut, who lost the Democratic primary to businessman Ned Lamont because of his support for the war and the president, turned the tables and easily won reelection.

In New York, Sen. Hillary Rodham Clinton (D) rolled up a big margin as she cruised to a reelection victory that is widely seen as a step toward a presidential campaign in 2008.

In New Jersey, appointed Sen. Robert Menendez (D) overcame a challenge from state Sen. Thomas H. Kean Jr., robbing Republicans of a seat that not long ago they thought they may be able to win. In Minnesota, a newcomer, Hennepin County Attorney Amy Klobuchar, held on to the seat of a retiring Democratic senator. In Maryland, Rep. Benjamin L. Cardin (D) was the winner over Lt. Gov. Michael S. Steele in the contest to succeed retiring Sen. Paul S. Sarbanes (D).

In Massachusetts, Sen. Edward M. Kennedy (D) won an eighth term. Democrats also held Senate seats in Delaware, Florida, Hawaii, Michigan, Nebraska, New Mexico, North Dakota, Washington, West Virginia and Wisconsin. In Vermont, Rep. Bernard Sanders (I) won the seat of retiring Independent Sen. James M. Jeffords.

Republicans held on to their Senate seats in Arizona, Indiana, Maine, Mississippi, Texas, Utah and Wyoming.

House results trickled in at first and then came in a torrent. Some of the most prominent Republicans were among the losers last night.

One was Rep. Nancy L. Johnson (Conn.), who won her first race in 1982 when Republicans were losing two dozen districts. She lost to state Sen. Chris Murphy. In Kentucky, Rep. Anne M. Northup has been targeted by Democrats in virtually every election but until last night was a survivor. She was defeated by John Yarmuth, editor of an alternative newspaper.

In Iowa, Rep. Jim Leach (R), who was not considered particularly vulnerable, lost to Dave Loebsack in a district that Sen. John F. Kerry won in the 2004 presidential election.

In Florida, Rep. E. Clay Shaw Jr., one of the most powerful Republicans in the House, lost his reelection bid to state Sen. Ron Klein. Republicans also lost the seat of former congressman Mark Foley (R), who resigned in disgrace over sexually explicit Internet messages sent to a former House page.

In Arizona, Rep. J.D. Hayworth, one of the GOP's most vocal and visible conservatives and a hard-liner on immigration, lost his reelection bid to former state senator Harry Mitchell. The Arizona Republic newspaper had endorsed Mitchell, referring to Hayworth as a 'bully.'

Republicans lost the scandal-scarred seats of former congressman Robert W. Ney in Ohio and former House majority leader Tom DeLay in Texas. Scandal also contributed to the defeat of two Pennsylvania incumbents, Rep. Curt Weldon (R), who lost to retired Navy Vice Adm. Joseph Sestak, and Rep. Don Sherwood (R), who fell to Christopher Carney.

The Northeast proved particularly difficult for Republicans. New Hampshire voters defeated both of their GOP incumbents. Only a few weeks ago, Reps. Charles Bass and Jeb Bradley appeared headed for reelection, but their races changed almost overnight. Bass was defeated by lawyer Paul Hodes, while Bradley lost to Carol Shea-Porter, a county chairman. She won a second straight upset last night after riding opposition to the war to a surprise primary victory.

In gubernatorial races , Democrats gained seven states and now control a majority nationwide. Big prizes included New York, where Attorney General Eliot L. Spitzer won handily against weak opposition, and Ohio, where Rep. Ted Strickland swamped Secretary of State J. Kenneth Blackwell. In Massachusetts, Clinton administration assistant attorney general Deval Patrick defeated Lt. Gov. Kerry Healey, who was attempting to succeed Gov. Mitt Romney (R).

Republicans had controlled all three states for more than a decade.

Democrats picked up a Southern seat when Arkansas Attorney General Mike Beebe defeated Asa Hutchinson for the post of retiring Gov. Mike Huckabee (R). They also added to their impressive strength among governors in the Rocky Mountains when Denver prosecutor Bill Ritter defeated Rep. Bob Beauprez in Colorado.

In Minnesota, incumbent GOP Gov. Tim Pawlenty held off a challenge from Democratic Attorney General Mike Hatch and a third-party candidate.

A national exit poll of voters in House races, conducted by Edison/Mitofsky for the National Election Pool, showed Democrats carrying independent voters, who emerged this fall as a critically important constituency in the midterm elections, by a wide margin. Meanwhile, about 90 percent of Republicans and Democrats were supporting candidates from their own parties, but independents were siding decisively with Democrats.

The divides that have defined the nation's politics over the past two years shaped yesterday's vote, but those hostile to the Bush administration, unhappy with Congress or pessimistic about the direction of the country far outnumbered those who approve of the performance of Bush and Congress or who think the country is heading in the right direction.

Four in five voters who approve of Bush's performance were supporting Republicans in House races, while an equal number of those who disapprove of his performance were supporting Democrats. But those who disapprove of the way the president has handled his job outnumber those who approve by about three to two.

Voters cited a series of issues that were extremely important in determining their candidate preferences, according to the national exit poll. They were not asked the most important issue affecting their votes.

About four in 10 voters called corruption and scandals in government an important issue and said they were voting heavily for Democratic candidates in the House. Forty percent said that the issue of terrorism was extremely important in their vote and that they were narrowly supporting Republican House candidates.

About four in 10 also cited the economy and said they were backing Democratic House candidates by a wide margin. Iraq, which has dominated much of the fall debate, was another issue that about four in 10 called extremely important in their votes, and they were also heavily backing Democrats.

Immigration reform was an issue that Republicans counted on to help their candidates. The three in 10 who called immigration reform extremely important in determining their votes split in favor of GOP House candidates, but not by as much as Republicans may have hoped. The strongest support for Republican House candidates was from those who cited values issues such as abortion and same-sex marriage.

Bush voted yesterday morning in Crawford, Tex., then flew back to Washington for a dinner with friends and aides. The group included first lady Laura Bush, White House Chief of Staff Joshua B. Bolten, top strategist Karl Rove, counselor Dan Bartlett, Republican National Committee Chairman Ken Mehlman, former commerce secretary Donald L. Evans and Bush friend Brad Freeman. After dinner, they watched election results come in upstairs in the White House residence.

The history of midterm elections put Republicans on the defensive from the start of the campaigns. The sixth year of two-term presidencies often has produced sizable losses and shifts in power in the House or Senate for the party controlling the White House. That was true in 1958, 1974 and 1986.

Dissatisfaction with the war and the administration compounded GOP worries, turning the campaign into a referendum on the president and his Iraq policies.

Bush's ratings began to slump more than a year ago and attitudes hardened after the administration's sluggish response to Hurricane Katrina in August 2005. By May of this year, the president's approval rating had plunged to 33 percent in a Washington Post-ABC News poll. Bush has struggled since to break 40 percent, and in the Post-ABC final preelection survey, his approval rating was 40 percent among all Americans and 43 percent among registered voters.

Even those numbers, however, were low by historical standards on the eve of midterm elections. Presidents hovering in the mid-40s or below at that point have seen their parties suffer major setbacks. That was the case for Bill Clinton in 1994, Ronald Reagan in 1982, Lyndon B. Johnson in 1966, and Harry S. Truman in 1946 and 1950. Jimmy Carter had an approval rating of 49 percent in 1978 and Democrats lost 15 House seats that year -- precisely the number Democrats needed to gain yesterday to win the House.

At the beginning of September, Bush sought to shift the focus from Iraq to the campaign against terrorism. He used the fifth anniversary of the Sept. 11 attacks to elevate his argument and throughout the campaign portrayed Democrats as weak on fighting terrorism. Most polls, however, showed the public far more focused on Iraq than on terrorism and until the very end expressed greater confidence in Democrats to deal with Iraq.

Unhappiness with the Republican-controlled Congress also contributed to the party's woes throughout most of the fall, with the 109th Congress recording some of the lowest approval ratings of any Congress in a decade." (Dan Balz and Debbi Wilgoren, The Washington Post, November 8, 2006)

Staff writers Daniela Deane and Lyndsey Layton, political researcher Zachary A. Goldfarb and staff researcher Madonna Lebling contributed to this report.