UKIP leader Nigel Farage has hailed gains in council elections across England as a "game changer".
UKIP won over 140 seats and averaged 25% of the vote in the wards where it was standing.
The Conservatives lost control of 10 councils, but retained 18, while Labour gained two councils and boosted its councillors by nearly 300.
David Cameron said he would "work really hard to win back" supporters who had decided to vote for UKIP.
Contests took place in 27 English county councils and seven unitary authorities, as well as in Anglesey. About 2,300 council seats were up for grabs in England, in a major mid-term test for the coalition government.
Four party politics
The BBC's projected national share of the vote put Labour in the lead with 29% of the vote and the Conservatives in second place with 25%, UKIP in third place with 23% of votes and the Lib Dems fourth with 14%.
An estimate from a BBC sample of key wards suggests that average turnout was 31%, down 10 points from the last local elections in 2009.
BBC political editor Nick Robinson said the vote shares confirmed four party politics were at play in these elections, but it was still unclear if this would carry through to a general election.
Responding to the success of UKIP, Prime Minister David Cameron said: "We need to show respect for people who have taken the choice to support this party and we are going to work really hard to win them back."
In other developments:
- Labour celebrates victory in the parliamentary by-election in South Shields, where UKIP finished second and the Lib Dems were relegated to seventh.
- Labour candidate Norma Redfearn defeats the Conservative incumbent Linda Arkley in the North Tyneside mayoral contest.
- Labour's Ros Jones beats incumbent mayor Peter Davies, who stood as an independent, to become Doncaster's new mayor.
- UKIP wins its first ever seats on Hampshire County Council - including two in disgraced former MP Chris Huhne's town of Eastleigh.
- UKIP wins 16 seats on Lincolnshire council, ensuring the Conservatives lose overall control, including three members of the same family.
- UKIP and the Green Party of England and Wales win their first ever council seats in Essex.
- The Greens lose their only seat in Hampshire, but beat the Conservative leader of Warwickshire council to take a seat there.
- In Cornwall a county councillor who quit after saying disabled children should be "put down" is re-elected.
- The BNP loses its only county council seat in the country.
- Anglesey, the only council in Wales to hold local elections this year, remains as no overall control, but there are six gains for Plaid Cymru.
The Tories were defending thousands of seats last fought in 2009 - when they were in opposition and when Labour had its worst night in local election history.
They retained control of traditional council strongholds like Wiltshire, Shropshire, West Sussex, Buckinghamshire, Essex, Dorset, Hampshire and Hertfordshire, as well as Somerset and Devon.
But they lost their majorities on 10 of their councils, which moved to no overall control, as both Labour and UKIP made gains.
Nearly 10,000 candidates were battling for seats in English county councils and unitary authorities - "top-tier" authorities in charge of schools, roads, refuse collection and fire and rescue among other services.
Labour made progress in the Midlands, taking control of Derbyshire and Nottinghamshire county councils, both of which it lost in 2009.
It also made double digit gains in Staffordshire, Cumbria, Warwickshire, Suffolk and Hertfordshire.
The most eye-catching performance was from UKIP, which is riding high in the opinion polls and fielded 1,700 candidates, three times the number that stood in 2009, when the party won just seven council seats.
The party became the official opposition in Kent, where it won 17 councillors, Lincolnshire, where it won 16 councillors and Norfolk, where it won 15 councillors.
It took seats in councils like Essex and Hampshire, where it previously had no councillors, but failed to pick up any seats in a number of councils including Hertfordshire, Warwickshire, North Yorkshire, Lancashire, Cumbria and Derbyshire.
The party, which campaigns for the UK to leave the European Union, polled 11 points higher, on average, than in wards where it stood in 2009.
UKIP's Nigel Farage told the BBC the party had taken its "first substantial step towards a party that can credibly win seats at Westminster".
"It's a fascinating day for British politics. Something has changed here.
"I know that everyone would like to say that it's just a little short-term, stamp your feet protest - it isn't. There's something really fundamental that has happened here.
"People have had enough of three main parties, who increasingly resemble each other. The differences between them are very narrow and they don't even speak the same language that ordinary folk out there, who are struggling with housing and jobs, speak."
He said the results put UKIP in a "very strong position" in the run-up to the next general election, but acknowledged that "when it comes to a general election we do have a problem, which is the first-past-the-post election system".
He confirmed on BBC Radio Kent that he would stand as a candidate at the next general election. In 2010 he unsuccessfully contested Speaker John Bercow's seat of Buckingham.
David Cameron said the gains made by UKIP were a "major lesson" for the three main Westminster parties.
"For the Conservatives I understand why some people who have supported us before didn't support us again, they want us to do even more to work for hard-working people to sort out the issues they care about," he said.
"More to help with the cost of living, more to turn the economy round, more to get immigration down, to sort out the welfare system. They will be our focus, they are our focus, but we have got to do more."
Labour leader Ed Miliband said he was pleased with his party's results but acknowledged the party still had more work to do.
He told the BBC: "I also recognise - having gone round the country during this campaign - the vote for UKIP, the two thirds of people who didn't vote, that there are still lots of people saying can anyone turn this country round? I believe Labour can and we're carrying on that work to convince people that we can."
Lib Dem leader Nick Clegg said it was "understandable" that people would be attracted to the "simple answers" UKIP was offering.
"But I don't think they do have answers to the dilemmas we face as a country," he said. "I believe that the Liberal Democrats do, that our message that we need to build a stronger economy and do so as fairly as possible, enabling everyone to get on in life is the right message for the future."
Education Secretary Michael Gove, asked what he thought about a councillor's call for a new Conservative leader, said the idea was "barmy" and "bonkeroony".
No elections took place in London, Scotland, Northern Ireland or anywhere in Wales other than Anglesey.