The Democrat victory, on the back of a voter mood to punish Bush for the Iraq war and political corruption and mismanagement, set the stage for policy changes and battles that run from tax and medical policy to the way the global war on terror is fought.
The victory claimed its first apparent victim on Wednesday, when Bush dumped his much-criticised Defence Secretary Donald Rumsfeld and replaced him with a former CIA chief whom Bush said would bring "fresh eyes" to the Iraq war.
But meanwhile the world waited on Thursday to see if the Republican defeat would lead to a dramatic policy shift in Iraq, with some allies of Bush already pledging to stay the course.
Australian Prime Minister John Howard, one of Bush's loyal friends in the war, was swift to pledge to keep troops in Iraq despite warnings that he too could face a voters' backlash.
"Although they are clearly looking for ways in which their tactics may change, their strategy is not going to change. They are not going to suddenly pull out of Iraq," Howard said.
The Democratic rout of Bush's party was sealed late Wednesday with their candidate's victory in a tight Senate race in Virginia.
US television networks and major newspapers reported that Democrat Jim Webb defeated Republican incumbent George Allen by some 7,200 votes out of a total of 2.3 million ballots, based on a survey of Virginia election districts conducted by the news agency Associated Press.
Webb declared victory in the race on Wednesday, but Allen has so far declined to concede defeat, leaving the door open for a possible vote recount in the race.
The Virginia victory, the final race out of 33 Senate seats up for grabs, handed Democrats control of both houses of Congress for the first time in 12 years.
The win gave Democrats an effective majority in the upper chamber: combined with two avowed pro-Democrat Independent senators in the 100-member body, the Democrats ended up with a 51-49 margin over Bush's party.
That followed their capture of control of the House of Representatives by a wide margin on Tuesday.
Bush acknowledged on Wednesday that voters were frustrated over the Iraq war when he announced Wednesday Rumsfeld's resignation and replacement with former CIA director Robert Gates.
"I recognise that many Americans voted last night to register their displeasure with the lack of progress being made" in Iraq, Bush told a news conference.
The president said he wanted "a fresh perspective" on how to secure victory, and signalled he was ready to work with the Democrats on a new strategy for a country where 2,800 US troops have died along with tens of thousands of civilians.
Earlier, Bush implicitly acknowledged that the election was a referendum on his leadership.
"As the head of the Republican Party, I share a large part of the responsibility ... I look at it race by race, it was close. The cumulative effect, however, was not too close. It was a thumping."
Republican House Majority Leader John Boehner said his party was "deeply disappointed" but predicted it would reclaim a majority in 2008.
Voters piled on anger over the course of the war in Iraq and a heap of corruption and scandals which have tainted the Republicans in the past two years, exit polls suggested.
They also expressed concern over skyrocketing health care costs, the economy, illegal immigration and "values" issues such as stem-cell research, gay marriage and abortion.
Republican congressional incumbents crashed to defeat in at least 16 states.
The Democrats also won six governors' seats to take the majority of the 50 statehouses for the first time in 12 years. Hollywood star Arnold Schwarzenegger, a Republican, bucked the trend and was re-elected in California, crushing Democratic rival Phil Angelides.

Copyright AFP (Agence France-Presse), 2006