Ed Miliband declared that Labour was "winning back people's trust" after a night of big gains in mid-term local elections across the country.
On a bruising night for the Tories and Liberal Democrats, the party took control of a series of key councils including Southampton, Birmingham, Plymouth, Reading, Norwich, Thurrock and Harlow.
In contrast Prime Minister David Cameron suffered the embarrassment of losing seats in his Witney constituency to Labour as it made inroads into the Conservative heartlands of southern England.
With around half of votes counted, Labour had racked up more than 470 new seats and looked set for overall gains of more than 700, while the Tories looked likely to lose more than 350 seats and the Liberal Democrats about 200.
Speaking outside his London home, Mr Miliband said: "We are a party winning back people's trust, regaining ground, but there is more work to do."
Liberal Democrat leader Nick Clegg said he was "really sad" at his party's results but insisted they would "continue to play our role" in Government dealing with the economic crisis.
"I am really sad that so many colleagues and friends - Liberal Democrat councillors, who have worked so hard, so tirelessly for so many years for communities and families in their local areas - have lost their seats and I want to pay tribute to all the great work they have done," he said.
"I am determined that we will continue to play our role in rescuing, repairing and reforming the British economy. It's not an easy job and it can't be done overnight but our duty is to boost jobs and investment and to restore a sense of hope and optimism to our country."
Foreign Secretary William Hague sought to play down the scale of the Conservative losses. He said: "These results - while it is never a good feeling to lose councillors - are well within the normal range of mid-term results for governments and I think not so good for the Opposition who are not getting 40% of the vote."
In a further blow to Mr Cameron, Manchester, Nottingham and Coventry ignored his pleas and rejected proposals for elected mayors. Birmingham and other cities are expected to follow suit. However, Mr Miliband did suffer a setback in Bradford, where his party lost seats to George Galloway's Respect party.