David Cameron says he hopes to govern for all of the UK as a BBC forecast gives the Tories 329 seats - enough to form a slender majority in the Commons.
The prime minister said it was "too early to say" the final result but he hoped to form a government.
Labour has been all but wiped out by the SNP in Scotland, while shadow chancellor Ed Balls also lost his seat.
The Lib Dems are heading for as few as eight MPs, with Vince Cable, Ed Davey and Danny Alexander losing their seats.
The BBC forecast, with well over half of the results now in, is Conservative 329, Labour 233, the Lib Dems eight, the SNP 56, Plaid Cymru three, UKIP two, the Greens one and others 19.
In other election developments:
- Ed Miliband said it had been a "difficult and disappointing" night for Labour
- Following a recount, Ed Balls lost his Morley and Outwood seat to the Conservatives by just over 400 votes
- Nick Clegg has held on to his Sheffield Hallam seat but said it had been a "cruel and punishing night" for his party and he would be making a statement on his future later
- George Galloway, who was reported to the police for retweeting an exit poll before voting ended, has lost to Labour in Bradford West
- Scottish Labour leader Jim Murphy and shadow foreign secretary Douglas Alexander have lost their seats to the SNP
- UKIP are polling strongly in the North of England and Douglas Carswell has retained his Clacton seat but Mark Reckless has lost his seat and Nigel Farage could fail to win Thanet South
- Former Lib Dem leader Charles Kennedy lost his seat to the SNP in Ross, Skye and Lochaber
- Conservative minister Esther McVey has lost Wirral West to Labour
- The Green Party is predicted to get one seat after Caroline Lucas retains the Brighton Pavilion constituency she won in 2010
- Watch BBC election coverage and follow latest reaction
Mr Cameron all but declared victory in a speech after being returned as MP for Witney, in which he set out his intention to press ahead with an in/out referendum on Britain's membership of the European Union and to complete the Conservatives' economic plan.
"My aim remains simple - to govern on the basis of governing for everyone in our United Kingdom," he said.
"I want to bring our country together, our United Kingdom together, not least by implementing as fast as we can the devolution that we rightly promised and came together with other parties to agree both for Wales and for Scotland.
"In short, I want my party, and I hope a government I would like to lead, to reclaim a mantle that we should never have lost - the mantle of One Nation, One United Kingdom. That is how I will govern if I am fortunate enough to form a government in the coming days."
Mr Cameron has returned to Downing Street with his wife Samantha and is expected to hold an audience with the Queen later on Friday.
Chancellor George Osborne said the Conservatives had been "given a mandate to get on with the work we started five years ago" and would follow the "clear instructions" of the British public.
Speaking in Doncaster, where he retained his seat, Labour leader Ed Miliband said; "Clearly this has been a very disappointing and difficult night for the Labour Party.