With 65 percent of the vote counted, 44 year-old Chavez had 56 percent compared to 39 percent for 62 year-old Yale-educated businessman Henrique Salas Romer, according to official results from the National Electoral Council.
People danced in the streets, set off fireworks and honked their horns in celebration.
"Venezuela is being born again," Chavez declared as soon as the election results were revealed and made an appeal for calm on the streets.
Chavez is calling for a new constitution, the dissolving of the Venezuelan Congress and he's promising to pursue prudent economic policies.
"Once again the people of Simon Bolivar have shown themselves to be a grand people," he told the Venevision Television Network. Chavez often invokes South American liberation hero Bolivar in his speeches.
Because of former Lt. Col. Hugo Chavez's meteoric rise in the polls, the vote has turned into a confrontation between rich and poor -- and a flashing red warning sign for the rest of Latin America. For the first time in 40 years of democracy, neither of Venezuela's two traditional parties fielded candidates.
"These are historic elections. Nothing like these elections has happened in Venezuela's political history," said U.S. Ambassador John Maisto.
In an effort to head off a Chavez victory, both the center-left Democratic Action Party and the center-right COPEI Party dumped their respective candidates during the past week and threw their support to independent candidate Henrique Salas Romer, who is running second in the polls.
But the last-minute maneuver did not appear to have the intended effect, pollsters said, nor did attempts in the pro- Salas media to portray Chavez as a vengeful modern-day Robin Hood ready to steal from the rich to give to the poor.
"The polls seem to indicate that the punishment vote is larger than the fear vote," Leon said.
In 1992, Chavez tried and failed to overthrow Venezuela's democratically elected government. His candidacy has blown a hole through the conventional wisdom that said democracy and free markets were inescapable in Latin America.
"Today a new Venezuela is being born," Chavez told reporters after casting his ballot amid a roaring throng.
Most polling stations opened on schedule, and voting was described as orderly. It appeared turnout would be high.
Reports that Chavez supporters would stage violent protests if their candidate loses prompted a call to peace from President Rafael Caldera.
"The government and armed forces have promised to respect the electoral results. That respect will be sacrosanct," Caldera vowed, adding tat "at the same we demand that the results be accepted in peace."
Chavez's leftist Patriotic Pole coalition, which calls for a slowing of privatizations and free-market economic reforms, already won a plurality of Congress in Nov. 8 regional elections, breaking the two traditional parties' 40-year political stranglehold.
Chavez's call for a new constitution and the dissolving of Congress has scared investors and exacerbated an economic crisis. Foreign oil companies, including Exxon, Mobile, Shell and British Petroleum, have put investment plans on hold.
Venezuela is the number one exporter of oil to the United States.
The eleventh-hour attempt by COPEI and Democratic Action to close ranks around Salas appeared to have failed. A poll taken earlier this week by the private Datanalisis firm showed Chavez with a comfortable 16-point lead - he had 53 percent support compared to Salas's 37 percent. The survey of 1,000 likely voters had a margin of error of plus or minus 3 percent.
Yet Salas supporters pointed out that the well-greased political machinery of the old-style parties could enable their candidate to stage an upset victory.
"I am absolutely convinced that together we are going to return happiness to Venezuela," Salas told reporters after casting his ballot in his home city of Valencia.
Until this week, Salas had taken great pains to distance himself from Democratic Action and COPEI -- aware that most Venezuelans blame them for squandering the world's largest oil reserves outside the Middle East.
The campaign took on overtones of class warfare. Those who oppose Salas, a former governor of industrial Carabobo state, said he would defend the interests of the oligarchy if elected.
"Chavez voters tell us in surveys they'll vote for him out of rage," said Luis Vicente Leon, director of the Datanalisis polling firm.
Chavez's opponents, meanwhile, say he is a dictator-in-waiting.
"To those who call us coup leaders or tyrants, we have to respond to them as Jesus of Nazareth: Forgive them, Lord, for they know not what they do," Chavez bellowed to hundreds of thousands of supporters at his closing rally in Caracas Wednesday night.
Yet Chavez's militaristic rhetoric and his trademark red parachutist's beret, worn by his supporters at campaign rallies, terrify middle and upper class Venezuelans, many of whom have already fled to Miami.
"That things have to get better, I agree, but without violence," said 78-year-old Caracas resident Recino Carbajal.
An economic crisis caused by a 12-year low in oil prices has made making ends meet all but impossible for most Venezuelans, whose standard of living has been steadily declining for more than 15 years.
"We want a change. If Chavez doesn't make this change, what is going to happen is a social explosion, a revolution," said Gabriel Jimenez, a 45-year-old telecommunication technician.
On Sunday, 11 million of the country's 23 million inhabitants were eligible to vote.
Among the trailing candidates was former Miss Universe Irene Saez, who had led the polls until earlier this year. Her candidacy was badly damaged by confusion among her staff and an endorsement by COPEI, which many people thought compromised her independence.
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