With 88 percent of the precincts reporting early Wednesday, lawyer and retired Air Force Capt. Bill Owens defeated businessman Doug Hoffman, the Conservative Party candidate, 49 percent to 46 percent.
Dierdre Scozzafava, a moderate Republican, Saturday under pressure from the party's right wing because of her support of abortion rights and same-sex marriage. She still picked up 5 percent of the vote.
Hoffman conceded the race Wednesday.
Hoffman started at a distant third and was viewed as a spoiler at best, cutting away at Scozzafava and opening the door for Owens. But prominent Republicans such as former vice presidential candidate Sarah Palin and Minnesota Gov. Tim Pawlenty endorsed Hoffman instead of the party-picked Scozzafava.
"Hoffman became the talisman for anger at the GOP establishment in Washington, anger at the big spending ways of Democrats in Congress, anger at the media -- a way to clear through a bundle of different resentments that tend to be shouldered by a party that has lost his way," says CBS News chief political consultant Marc Ambinder.
But Hoffman lost, explains Ambinder, largely because voters in the 23rd District did not embrace his philosophy. "They saw Hoffman as a carpetbagger -- he didn't even live in the district -- who was trying to hijack their district for his own ideological ends."
Owens' victory may signal renewed strength among Democrats, or at least reassure them of Republicans' perceived weakness. The seat has been strongly Republican for decades. The outcome leaves Republicans holding only two seats in the state's 29-seat congressional delegation. Republican John McHugh vacated the seat in September to become Army secretary.
"They're in a civil war over the definition of their party," said Paul Blank, a Democratic consultant. "And the extremists have won."
Republicans will be sorting out their identity as the party tries to strike a balance between growing its ranks and preserving the values that set it apart from the Democratic Party.
"I think that the Republican Party is broad enough to handle many different candidates, but the fact is that I'm a commonsense conservative Republican - I am not a radical," Hoffman said Monday. "The point is that Assemblywoman Scozzafava was not a moderate Republican. She was an ultraliberal Republican."
CBSNews.com Election Night Coverage:
All Election Night 2009 Results
Republicans Sweep N.J., Va. Gov. Races
N.Y. Democrat Owens Wins House Seat
Maine Voters Reject Gay Marriage
Breckenridge, Colo., Votes to Legalize Pot
What McDonnell's Win Means for the GOP, Obama
Corzine's Fall Has Been Festering for a While
What Doug Hoffman's Loss Means to Conservatives
Lessons for the White House from '09 Election Results
Why Christie Won in New Jersey
McDonnell Won Due to Turnout, Independents
Exit Polls in Va. and N.J.: The Obama (Non) Factor?