David Cameron is heading back to Downing Street after a late surge in support for the Conservatives.
The Tories, who inflicted the country with savage cuts, zero hours and the bedroom tax, were set to be the largest party - but could be still short of an overall majority.
And Mr Cameron will head a divided nation after the SNP demolished Labour to sweep the board in Scotland.
The Lib Dems also had a catastrophic time as their seats tumbled to the Tories.
Labour casaulties included Shadow Foreign Secrertary and the party’s election coordinator Douglas Alexander who lost to a 20-year-old SNP student.
The scale of Labour’s defeat was forecast by the shock exit poll predicted the Conservatives to win 316 seats, Labour 239, the SNP 58, the Lib Dems on 10 and UKIP two.
A dismal night for Ed Miliband was sealed when Labour failed to take Nuneaton - the party’s 37th target - from the Conservatives.
A dire result saw the Tories increase their majority in the battleground seat with 3% swing.
Required for a majority: 323
Labour’s hopes had been dashed when the Tories comfortably held the Swindon North marginal - one of the seats Mr Miliband needed to get a majority- on a 4.3% swing from Labour to the Conservatives.
And they failed to win their number one target seat of Warwickshire North where the Tories were defending a 54 seat majority.
The grim set of results also saw the Conservatives increase their vote in the London seats of Putney and Battersea - both of which were Labour under Tony Blair.
With Labour suffering such deep wounds few now expect Mr Miliband to remain as leader.
Mr Cameron could still fall short of the 323 needed for an overall Commons majority and will have to rely on the few remaining Lib Dems or the Democratic Unionists and UKIP to form a Government.
The Tories could also be the first governing party since Margaret Thatcher in 1983 to put on seats.
The exit poll points to a terrible night for Nick Clegg whose party would lose 46 of its 56 seats and a triumph for the SNP which is forecast to have as many as 58 of the 59 MPs in Scotland.
Scottish Labour leader Jim Murphy was among the high profile casualties. The Tartan tidal wave also swept away Lib Dem minister Jo Swinson.
UKIP looked set to increase its share of the vote but Nigel Farage was set to lose Thanet South. Mr Farage has said he would quit as leader if he failed to win the seat.
With the Lib Dems heading for their worst result since 1970, Mr Clegg looked to have paid the price for going into Coalition with the Tories and his broken promise on tuition fees.
Deputy leader Tim Farron said: “Fear may have won the day.”
Tory Chief Whip Michael Gove gloated: “I believe it could be right. And if it is, it means the Conservatives have clearly won and Labour have clearly lost.
"We have not had an incumbent Government do anything like this since 1983.”
But Labour refused to accept the exit poll with a source saying “It looks wrong to us.”
They pointed to another exit poll by YouGov that put the Tories on 284, Labour on 263, Lib Dems 31, SNP 48 and UKIP 2.
Lord Kinnock came close to conceding defeat.
He said if the results continued as they were it would be a night of “great disappointment.”
Putting on a brave face, Ed Balls stressed the exit poll could be wrong and said Mr Cameron’s premiership remained on a “knife edge.”
“David Cameron said the test for him was to win a majority. And even on this exit poll he fails to deliver that.
“This exit poll is based first of all on a complete collapse in the Lib Dem vote.
"It would show the Lib Dems have paid a huge price for being in a Coalition which has been so unpopular with their voters, and many voters across the country,” he said.
And deputy leader Harriet Harman insisted Labour could still be in the position to form the next government.
She said: “If that exit poll is right then after this election the Tories have more or less lost the majority for their coalition.
"And the question is – if the exit polls are right – whether they would be able to form a majority in the new Parliament.
“Their majority for the coalition is right down according to the exit polls. The question is whether they would be bale to command a majority.
“The position is straight forward in the House of Commons. The question is of the MPs elected tonight do the Coalition still have a majority?
"Do the Tories have the ability to make a majority Government? And if they don’t, then it will fall to the Leader of the Opposition.”
But Labour grandee Lord Mandelson said “it would be very difficult indeed” for Mr Miliband to remain as leader if the exit poll was right.
Labour’s Bridget Philipson comfortably won the first seat to declare Sunderland South but UKIP surged to second place above the Tories.
The early results showed Labour holding on to its strongholds with a 4% swing from the Conservatives.
A Labour source said: “It’s been close all the way through – and exit polls have been wrong in the past.
“YouGov is very different from the BBC’s. The Coalition came into the election with a majority of 73 and even if the BBC exit poll is right, that has been all-but wiped out.
“Who forms the next government is who can carry the confidence of the House of Commons.”
Lib Dem President Baroness Brinton said: “I would be astonished if we had 10 seats at the end of the night.”
The Labour leader had been given hope that the sunny weather in most parts of the country had increased turn-out - usually a boost to Labour.
The Tories are defending 302 seats, Labour 256 and the Lib Dems 56. But the exit polls suggest Mr Cameron will fall short of the 323 MPs needed to form a Government.
The Conservatives now face protracted negotitions on how to build another Coalition and whether to turn ot the Lib Dem rump or try to work with the DUP and UKIP.
The Lib Dems have said they will not sign up to the £12billion welfare cuts and is demanding the any Governnent signs up to increased education spending.
Former Cabinet Secretary Lord O’Donnell said Mr Cameron may choose to govern alone if the poll was correct - or sign another deal with the Lib Dems.
He said: “If that poll is right, David Cameron looks to have won virtually enough seats to get there.
“Yes, you might get Ed Miliband as Prime Minister. But if those exit polls are correct, that looks a very unlikely scenario.”
The Cabinet manual - the official guide to Parliamentary rules - says the leader with the largest number of MPs gets the chance to form the next government. If he should fail, then the leader of the next largest party is offered the chance.
A smiling Ed Miliband and his wife Justine voted shortly after 8.30am in his Sutton Village Hall in his Doncaster North constituency.
In a Twitter message he said: “I’ve just voted in Doncaster. Today isn’t a day to vote simply for Labour but to vote for yourself and for your family.”
David Cameron and his wife Samantha, dressed in a light blue dress, voted in his Witney seat at 10.30am. In case of any doubt, the PM noted on Twitter they had both voted Conservative.
Nick Clegg and his wife Miriam voted at 11.30am in his Sheffield Hallam constituency. Mrs Clegg mischievously wore the Coalition colours with a yellow top and blue skirt.
Characteristically, Nigel Farage tweeted a picture of himself having a lunchtime pint shortly after voting in Thanet South.