Anthony Albanese will return Labor from the political wilderness to government, seizing power from the Coalition after it has been almost a decade in office.
While it remains unclear if Labor can form a majority, the ALP is on track to finish ahead of the Coalition and more likely to reach a minority government, the ABC has projected.
This win means Mr Albanese will replace Scott Morrison as Prime Minister, making him the 31st person to hold the nation's top job.
The son of a single parent who grew up in public housing, Mr Albanese has reached the pinnacle of his career after 26 years in the parliament.
"It is an incredible honour," Mr Albanese told reporters after leaving his house to head to speak at a party event.
Introduced by Labor Senate Leader Penny Wong, Mr Albanese took to the stage and claimed victory.
"I say to my fellow Australians, thank you for this extraordinary honour," he said.
"Tonight the Australian people have voted for change.
"I am humbled by this victory and I'm honoured to be given the opportunity to serve as the 31st Prime Minister of Australia."
The Labor leader will be sworn in with four of his most senior frontbenchers on Monday.
Mr Albanese said he hoped his story would inspire a future generation of Australian leaders.
"My mother dreamt of a better life for me and I hope that my journey in life inspires Australians to reach for the stars," he said.
"I want Australia to continue to be a country that, no matter where you live, who you worship, who you love or what your last name is, that places no restrictions on your journey in life."
Morrison to step down as Liberal leader
Mr Morrison took responsibility for the loss and said he would step down as Liberal leader.
"To my colleagues tonight who have had to deal with very difficult news and who have lost their seats tonight, I, as leader, take responsibility for the wins and the loses," he told the Liberal Party faithful on Saturday night.
"That is the burden and that is the responsibility of leadership."
Mr Morrison congratulated Mr Albanese, wished the incoming government well and said he would pave the way for the Labor leader to be sworn in as prime minister, to allow him to travel to Tokyo for a meeting with world leaders on Tuesday.
"I always believed in Australians and their judgement and I've always been prepared to accept their verdicts and tonight they have delivered their verdict," Mr Morrison told supporters in Sydney.
Labor started the campaign, notionally, with 69 seats.
As of 10:30pm, the party looks set to make history by winning government from opposition despite going backwards on its national primary vote — down 2 per cent as of 10:30pm.
Crossbench and minor parties have experienced major gains, while the Coalition's primary vote is down more than 5 per cent.
The Liberal Party suffered major losses to so-called "teal" independents, which look to take the once safe seats of Mackellar, Goldstein, North Sydney, Wentworth and Kooyong, which will take the crossbench to record levels.
Treasurer Josh Frydenberg looks to be one of the highest profile Liberal losers, telling supporters at 10pm that his path to re-election looked tough in the seat of Kooyong.
"So while it's mathematically possible that we win Kooyong, it's definitely difficult," he said.
Mr Frydenberg was considered a frontrunner to lead the Coalition in opposition.
Labor has also picked up Liberal seats in Reid and Robertson, in NSW, Higgins and Chisholm, in Melbourne, multiple seats in Perth and the Adelaide seat of Boothby.
The Coalition has lost the seat of Ryan, in Brisbane, to the Greens.
But not everything has gone Labor's way.
Senator Kristina Keneally's attempt to move to the lower house appears to have failed, with the ABC projecting independent Dai Le will win the Western Sydney seat of Fowler, one of the most-diverse electorates in the country.
Fellow Labor frontbencher Terri Butler is also in a battle in her Brisbane seat of Griffith.
Defence Minister Peter Dutton held his seat and becomes one of the most likely contenders to be the next Liberal leader.
"We have, as a Liberal family, suffered a terrible day today," he said.
"There are colleagues around the country, good people, who have potentially lost their seats."
Finance Minister Simon Birmingham said his Liberals needed to take stock from the swings it was seeing against it in once-safe seats.
"It is a clear problem that we are losing seats that are heartland seats, that have defined the Liberal Party for generations," he said.
"And so, if we lose those seats, it is not certain that we will, but there is clearly a big movement against us and there is clearly a big message in it, and we need to heed that message."
Senator Birmingham said his party "absolutely" needed to pre-select more women but feared that effort could be even harder with the loss of first-term female MPs Katie Allen, Fiona Martin and Celia Hammond.
