The public's expectations were high that Obama, who will be the first African-American U.S. president, will follow through on campaign promises to end the long-running war in Iraq and fix the financial ills that many blame on Bush and his party.
Democrats picked up five more seats in the Senate in Tuesday's voting, increasing their control in the 100-seat upper house to at least 56. They currently have a 51-49 majority, including two independents who vote in their caucus.
Three Senate races with Republican incumbents remained undecided, among them the contentious re-election bid by 84-year-old Sen. Ted Stevens of Alaska, the longest-serving Senate Republican, who was convicted last month of lying on Senate forms to hide favors he received from a contractor.
Races in Georgia and Oregon were too close to call.
Despite the strong showing, Democrats appeared to be falling short of their goal to take 60 Senate seats. A 60-40 majority would make it nearly impossible for the opposition to use procedural maneuvers to block Democratic proposals from coming to a vote.
In the lower chamber, the House of Representatives, the Democrats expanded their majority by dominating the Northeast and ousting Republicans in every region. The Democrats added at least 17 seats to the 30 they took from Republicans in 2006. Fewer than 10 races remained undecided.
Republicans were on track for their smallest numbers since 1994, the year a Republican Revolution retook the House for the first time in 40 years.
The Democratic edge in the current Congress is 235-199 with one vacancy in a formerly Democratic seat. Two Louisiana seats, one Democratic and one Republican, won't be decided until December because hurricanes postponed their primaries until Tuesday.
"The American people have called for a new direction. They have called for change in America," said House Speaker Nancy Pelosi.
It was the first time in more than 75 years that Democrats were on track for big House gains in back-to-back elections.
"This will be a wave upon a wave," Pelosi said.
House Republicans were licking their wounds and hoping to increase their numbers in the 2010 election.
"We sort of got through this, we think, a little bit better than some people might have expected," said Rep. Tom Cole of Oklahoma, the head of the Republican House campaign committee. "Our worst days are behind us."
The Democratic victories in the Senate included an upset in North Carolina by Democratic state legislator, Kay Hagan, who unseated Sen. Elizabeth Dole, one of the biggest names in the Republican Party. The former Cabinet secretary in two Republican administrations had been criticized for spending little time in recent years in her home state.
In Virginia, former Democratic Gov. Mark Warner breezed to victory over another former governor, Republican Jim Gilmore, in the race to replace retiring five-term Republican Sen. John W. Warner. The two Warners are not related.
In the West, two Udalls were elected to the Senate. In Colorado, Mark Udall, son of the late Arizona Rep. Morris "Mo" Udall, took the seat vacated by retiring Republican Sen. Wayne Allard. His cousin, Tom Udall, whose father Stewart Udall was Interior Secretary in the Kennedy administration, took the New Mexico Senate seat vacated by retiring Republican Sen. Pete Domenici.
In New Hampshire, Republican Sen. John Sununu lost to Democrat Jeanne Shaheen in a rematch that saw Shaheen referring to Sununu as Bush's "evil twin."
Senate Majority Leader Harry Reid, a Nevada Democrat, attributed the party's gains to Obama's coattails.
"It's been a really good night," Reid told The Associated Press. "Obama ran a terrific campaign, he inspired millions of people."
According to other preliminary counts, 12 Democrats retained their seats and 15 Republicans were re-elected or won seats vacated by retiring Republicans.
Incumbent Republican Sen. Norm Coleman was re-elected in Minnesota, beating out comedian Al Franken, a Democrat, in a tight race that was too close to call until Wednesday morning.
Among the other Republican survivors was Sen. Mitch McConnell of Kentucky, who outpolled millionaire businessman Bruce Lunsford to retain his seat. McConnell, the Senate minority leader, is a master strategist and could be a thorn in the side of the Democrats.
"Winston Churchill once said the most exhilarating feeling in life is to be shot at and missed," McConnell said. "After the last few months I think he really meant to say there is nothing more exhausting. This election has been both."
The Democratic winners included Obama's running mate Joe Biden of Delaware who was elected to his seventh senate term on Tuesday but must give up his seat now that he will become vice president. The state's governor will likely appoint a fellow Democrat to fill Biden's seat until 2010 when a new election will be held.
A total of 35 seats were in contention in the Senate.
In the House, all 435 seats were up for election.
The defeat of 22-year veteran Rep. Chris Shays in Connecticut gave Democrats every House seat from the northeastern New England states. The victory by Democratic businessman Jim Himes occurred despite Republican Shays' recent highly publicized late criticism of McCain's presidential campaign.
The Democrat also won an open seat in the borough of Staten Island, giving them control of all of New York City's congressional delegation in Washington for the first time in 35 years. The incumbent Republican Rep. Vito Fossella was forced to resign amid drunk driving charges and revelations that he fathered a child from an extramarital affair.
Elsewhere in the northeast, Republican Reps. John R. Kuhl of New York and Phil English of Pennsylvania were defeated.
In the South, Democrats took seats in Alabama, North Carolina and Virginia. In Florida, two Republican incumbents were defeated by Democrats, including Rep. Tom Feeney, who was under fire for ties to a disgraced lobbyist.
In the Midwest, Democrats captured one seat in Illinois and two seats each in Michigan and Ohio. Rep. Steve Chabot, a 14-year veteran, lost in a district that includes portions of Cincinnati, which has the largest black population of any congressional district in the nation held by a Republican. Obama's candidacy was a major factor in the race, where state Sen. Steven Driehaus won election.
Democrats also made inroads in the West, where they captured two New Mexico seats, one seat each in Colorado and Nevada, and one left open in Arizona by retiring Republican Rep. Rick Renzi, who is awaiting trial on corruption charges.
Among the handful of losing Democratic incumbents was Rep. Tim Mahoney in Florida, who recently admitted to having extramarital affairs. He was defeated by Republican attorney Tom Rooney.
But Rep. John P. Murtha, a Pennsylvania Democrat who angered his constituents by describing them as "racist," easily won re-election.