Labour won 28 seats - three short of the total it needed to control the 60-seat assembly outright.

Party leader Alun Michael, who scraped in as a top-up candidate, is now widely expected to try to achieve a partnership with the Liberal Democrats who have six seats.

Plaid Cymru will be the second-largest group in the assembly with 17 seats. The Conservatives have nine.

All the parties have expressed disappointment that only 46% of Wales's 2.2m voters turned out to vote.

'A historic day'

Wyre Davies: "Plaid Cymru finds itself in a position to wield real power"

However, Mr Michael, the Welsh Secretary and now also prospective first secretary of the assembly, said it was "a historic day".

"We now have an opportunity to work in the assembly to make Wales a better place," he said.

But jubilant nationalists have been celebrating landmark victories in Labour heartlands where they enjoyed swings of up to 35%.

Among their major gains was Rhondda, shutting out Labour's Wayne David who had been so certain of victory he had resigned his seat in the European Parliament.

Ron Davies: First person into the assembly

Islwyn, where Neil Kinnock was once MP, and Llanelli, another strong Labour constituency also fell.

Ironically, Labour's worse than expected national performance made Mr Michael's victory as a top-up candidate more likely under the assembly's system of proportional representation.

Mr Michael's rise to the Welsh party leadership started with the resignation from the Cabinet of former Welsh Secretary Ron Davies following mysterious events in a London park.

His victory in the resulting internal leadership poll created bitterness within the party as his left-wing rival Rhodri Morgan lost despite securing the backing of a majority of individual members.

In a highly-symbolic twist, Mr Davies was the first person to be elected to the assembly.

Ron Davies MP: "A disappointing turn out"

It was an extraordinary personal comeback for the main architect of Labour's devolution plans after his bizarre fall from grace last year.

Mr Morgan and Plaid Cymru President Dafydd Wigley were also both elected with comfortable majorities.

Tory leader Rod Richards and his Lib Dem counterpart Michael German were elected as top-up candidates by the second of the two assembly votes given to every voter.

'A political earthquake'

Plaid Cymru's Dafydd Wigley: Elected in Caernarfon

Mr Wigley said it was an "outstanding day" for his party.

"It is a political earthquake that has been gathering momentum over several weeks. People didn't think it was happening. Even we didn't realise it was happening to such an extent," he said.

Mr Morgan described the prospect of Labour failing to win a majority as "very disappointing".

"I thought we might have had a clear majority of six or eight seats," he said.

But Mr Morgan said he would not be afraid of working in an assembly coalition.

"Everyone elected will be conscious of the need to do a good job for Wales. We have all got to make it work," he said.

Turnout lower than expected

Under the assembly election system 40 of the 60 members were chosen by the familiar first-past-the-post system in constituencies corresponding to those of the existing 40 Welsh Westminster MPs.

The remaining 20 members were elected by a system of proportional representation, with four being elected from a party list in each of Wales's five electoral regions, which are based on the European Parliament constituencies.

Politicians from all parties had hoped for a respectable turnout on Thursday after a campaign dogged by claims of voter apathy.

The assembly will be based here before a purpose-built home is ready

However, the 46% turnout was short of the 60% which Labour had wanted to give the assembly greater credibility.

But it is still respectable compared with the turnout in local elections in England and Wales and at the Scottish Parliamentary elections.

Within the average there were great variations from 60% in Caernarfon to 32% in Alyn and Deeside

Mr Morgan said the results showed the parties had to listen more to the electorate.

"If you can only persuade one out of two people to come out and vote that poses a big question to us as politicians," he said.

Growing support for assembly

A BBC poll taken on the day of the election indicates growing support for the assembly among Welsh voters.

The assembly will have powers over health policy

The referendum to set up the assembly in 1997 only attracted half the electorate and there have been fears that the elections to choose the members of the new body may attract a small showing too.

But of those asked in the BBC poll, 46% said they thought the assembly would bring better government to Wales.