LONDON — Tony Blair, the Bush administration's closest foreign ally, won a historic third term as British prime minister yesterday but his Labor Party suffered a sharply reduced parliamentary majority in apparent punishment for going to war in Iraq, according to exit-poll projections. A chastened Blair said "we will have to respond to that sensibly and wisely."

Such an outcome, if confirmed by the vote count, could set the stage for Blair to be replaced in midterm by a party rival such as Gordon Brown. As Treasury chief, Brown was widely credited for the strong economy that appears to have clinched Labor's victory, outweighing the bitterness many voters said they felt over Iraq.

While Brown expressed total support during the campaign for Blair's stance on Iraq, many analysts expect that, as prime minister, he would steer a more independent course from Washington on foreign-policy issues.

The BBC and Sky news both projected Labor would win 79 more seats than all the other parties combined, down from its 161-seat margin in the departing House of Commons. Partial official results showed Labor incumbents winning 337 seats, the Conservatives winning 167, while 54 went to the Liberal Democrats — the only party to have opposed the Iraq war — and 10 to other smaller parties. If the projections are correct, Blair could face difficulties controlling a faction of his party deeply disillusioned with his leadership, especially over Iraq, and believed to be more loyal to Brown.

Blair acknowledged the exit polls. "It seems as if it's clear ... that the British people wanted the return of a Labor government but with a reduced majority, and we have to respond to that sensibly and wisely," he said.

Other European leaders who backed the war also have suffered in elections. Voters in Spain last year ousted Prime Minister José María Aznar, and Italian Prime Minister Silvio Berlusconi is struggling to remain in power.

The White House reacted cautiously. President Bush was expected to make a call to Blair once the vote count became clearer, aides said.

Gordon Brown

Brown called the predicted Labor victory "historic" but said it was too early to say what the majority would be.

While Blair apparently was diminished in victory, Conservative leader Michael Howard gained stature as his party lost a third straight election but at least showed some signs of life.

The Conservatives were projected to take 33 percent. The Liberal Democrats were in third place with 22 percent.

A big part of the Conservative strategy was to make the election a referendum on Blair, urging voters to "wipe the smirk" off his face. Although Howard supported the Iraq war, he attacked Blair, accusing the prime minister of lying about intelligence and the legality of the invasion and lacking a plan to win the peace.

But Blair benefited from the Conservatives' even greater unpopularity and a perception that the opposition is less capable of handling the economy.

And the government's strong economic record — Britain's growth is high and unemployment low compared with much of the rest of the European Union — appears to have outweighed the resentments over Iraq. Labor is also credited with improving public services such as health and education through investment.

Britain's economy is closer to the U.S. model than to France or Germany, welfare states. But Britain's social model is geared much more toward smoothing out social inequality than is America's — a 17 percent sales tax and a 40 percent top tax rate help pay for benefits such as free health care and unemployment aid.

Indeed, Blair ran into trouble when he tried to introduce modest tuition fees for university students.

On foreign policy, Blair helped bring about a historic breakthrough in the Northern Ireland dispute. He also tried to act as a bridge between continental Europe and the United States. Blair believes in the process of European unification, but he and Brown kept Britain out of the European single currency, in part because the public was deeply skeptical.

Never before has the Labor Party won three straight elections. Margaret Thatcher accomplished the same feat for the Tories, the only other prime minister in modern British history to do so.

Still, the projected victory for Labor yesterday stood in stark contrast to Blair's landslides in 1997 and 2001.

His government only narrowly defeated internal rebellions by Labor lawmakers in the last session of Parliament, including on the crucial vote to go to war in Iraq and the legislation to introduce tuition fees for university students, allow more private funding for state-run hospitals and toughen anti-terrorism laws.

Blair, 52, says this will be his last term. A politically weakened Blair would find it difficult to persuade British voters to approve a proposed constitution for the European Union — which requires ratification by all member states.

Iraq loomed large in voters' thinking.

"Iraq has been a big thing — trust," said Nicola Wyndham, 33, who voted for Labor four years ago but switched to the Liberal Democrats this time. "He [Blair] has had eight years to make an impact and he really hasn't. There are still problems with health, education and crime."

"I've turned from Labor to Liberal Democrat because I don't really believe what Labor are saying," said voter Marguerite Hoy.

Information from the Dallas Morning News and Knight Ridder Newspapers is included in this report.