UKIP has claimed its first elected MP by winning 12,404 votes in the Clacton by-election and slashing Labour's majority in Heywood and Middleton to just 617 votes.
Former Conservative MP Douglas Carswell won a landslide victory in Clacton, Essex, by securing 21,113 of the 35,386 votes cast.
Nigel Farage's party also forced a recount in Heywood and Middleton, where Labour's Liz McInnes narrowly defeated UKIP's John Bickley.
Mr Farage told Sky's Faisal Islam the strong UKIP result showed the Eurosceptic party is "ripping lumps out of the old Labour vote in the north of England".
"I'm very excited by what's happening in the north of England ... Labour have won, just," he said.
Mr Carswell, who triggered the Clacton by-election when he defected from the Tories, said UKIP's success reveals a "profound change in British politics".
Speaking after the result was announced, he said: "We must be a party for all Britain and all Britons: First and second generation as much as every other.
"Our strength must lie in our breadth. If we stay true to that there is nothing that we cannot achieve."
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Gallery: UKIP Surge In By-Election Results
UKIP has its first elected MP after Douglas Carswell took almost 60% of the vote in the Clacton by-election.
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Mr Carswell won the seat with a majority of 12,404 over the Tory candidate Giles Watling.
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Liz McInnes won the seat for Labour in the Heywood and Middleton contest, but its majority of almost 6,000 in 2010 was slashed to just 617 votes.
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On a turnout of just 36%, Ms McInnes won with 11,633 votes, defeating UKIP's John Bickley on 11,016.
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Ed Miliband's party's majority had been almost 6,000 in 2010, but a UKIP surge saw a 17.65% swing to Nigel Farage's party.
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A triumphant Mr Carswell said "there is nothing that we cannot achieve" after winning Clacton.
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UKIP's first elected MP to Parliament forced the election after defecting from the Tories.
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Mr Carswell was the favourite to win, but there were still nerves on the night.
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Mr Carswell took almost 60% of the vote.
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Mr Farage said: "Congratulations Douglas Carswell, a brave and honourable man who has a just reward."
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Ms McInnes won with 11,633 votes in Heywood and Middleton, defeating Mr Bickley on 11,016.
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Despite UKIP's loss in the Lancashire constituency, Mr Bickley told Sky News "the Labour vote had collapsed".
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Mr Farage went on to tell Sky News: "We are ripping lumps out of the old Labour vote in the north of England. The truth of what has happened in the North today is that if you are anywhere north of Birmingham, if you vote Conservative you get Labour."
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He added: "And the reason we haven't won up there, despite a fantastic campaign, is that too many people have stuck with the Conservatives, not recognising that UKIP is now the challenger to Labour in every urban seat in the north of England."
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Turnout in Clacton was 51.2%, while in Heywood and Middleton it was just 36%.
Ms McInnes gained 11,633 votes in Heywood and Middleton, where voter turnout fell to just 36%.
In her victory speech, Ms McInnes said the by-election result was a win for the NHS.
"The people gave their backing to Ed Miliband's plans for an NHS with the time to care," she said.
"They have rejected a Tory government that is only standing up for the privileged few."
Analysts say Labour's vote was damaged by the low turnout. Voter turnout was higher in Clacton, where 51.2% of voters cast their ballot.
Sky's Jon Craig said the dramatic decline of Labour's majority in Heywood will trigger further debate about Ed Miliband's leadership.
"UKIP have done better here than even they thought they would. They've come within a whisker of pulling off a sensational by-election victory."
Labour has highlighted the collapse of the Tory and Liberal Democrat vote as reasons for UKIP's strong showing.
Backbench MP John Mann said: "The real issue is why so many Labour voters are not bothering to vote. The mantra of 'must work harder' is not sufficient.
"Ed Miliband does a lot of listening. Now he needs to do a bit more hearing."
Voters in Heywood cast their ballot for a new MP following the death of Labour's Jim Dobbin last month.
Mr Dobbin held the seat from 1997 and was returned in 2010 with a significant majority.
The vote in Clacton was triggered in August by Mr Carswell's defection to UKIP.
UKIP's next target is Rochester and Strood, where defector Mark Reckless is hoping to return to Parliament following his defection.
Mr Farage told Sky News there would be further defections to his party in the months running up to next year's General Election.
"There comes a point where there will be backbench Conservatives, and perhaps some Labour ones too, who will reckon they have got a better chance on a UKIP ticket net year than a Tory or Labour ticket," he said.
:: Watch full coverage and reaction throughout the day on Sky News - available on skynews.com, Sky News for iPad and on Sky 501, Virgin Media 602, Freesat 202 and Freeview 132.
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