Japan is suffering record unemployment and its economy is struggling to emerge from a bruising recession. The DPJ has said it will shift the focus of government from supporting corporations to helping consumers and workers.
The opposition Democratic Party of Japan (DPJ) is set for a massive election victory, exit polls suggest.
The DPJ has won 300 seats in the 480-seat lower house, ending 50 years of almost unbroken rule by the Liberal Democratic Party (LDP), NHK TV says.
DPJ leader Yukio Hatoyama said the people were "clearly fed up with the policies of the governing party".
Prime Minister Taro Aso has said he will resign as head of the LDP, taking responsibility for the defeat.
Japan is suffering record unemployment and its economy is struggling to emerge from a bruising recession.
The DPJ has said it will shift the focus of government from supporting corporations to helping consumers and workers.
The exit polls suggest a stunning reversal of fortune for Japan's political parties, reducing the LDP to a rump in parliament, correspondents say.
Mr Aso's party has governed Japan for all but 11 months since 1955.
Official results are expected early on Monday, but a senior LDP official acknowledged that the party was heading for a "historic defeat".
"The predictions by the media were shocking. We had doubts, but now I think they are becoming a reality," Yoshihide Suga, deputy chairman of the LDP's election strategy council, was quoted as saying by Reuters news agency.
Mr Hatoyama, who is almost certain to lead the next government, is the wealthy grandson of the founder of Bridgestone tyres, whose other grandfather was a former LDP prime minister.
He has promised to boost welfare, reform the bureaucracy and seek a more balanced relationship with the United States.
But the BBC's Roland Buerk in Tokyo says he will have little time to savour his victory. Elections to the less powerful upper house are due next year, he says, and the DPJ will want to retain its control there to push through its agenda.
Turnout in Sunday's election was reportedly just under 50%, slightly down from 2005 when elections saw the charismatic Junichiro Koizumi's LDP elected with a significant majority.
Officials said the turnout held up despite a combination of typhoon-triggered rainfall around Tokyo and a government warning that a swine flu epidemic was under way.
Japanese broadcaster NHK announced its exit polls moments after voting ended at 2000 (1100 GMT), saying they showed a major power shift in Japan.
"Our exit polls show the main opposition Democratic Party will seize more than 300 seats, way more than a majority in the lower house," said the newsreader.
"That signals a defeat for the governing coalition."
The LDP had 303 seats in the outgoing parliament, compared to the DPJ's 112. The projections were based on exit polls of roughly 400,000 voters.
If the DPJ were to gain such a landslide majority, it could establish a new cabinet within the next few weeks.
It won control of the upper house in July 2007, amid voters' anger at a series of scandals and the loss of millions of pension payment records.
Alastair Leithead, BBC News, Tokyo
It's a massive swing. What the opposition can do now they are coming into power, and untested, is deal with the serious problem revolving around the economy and the recession.
Unemployment is at the highest level it ever has been and by the end of next year Japan will no longer be the second biggest economy in the world - that will be China.
Almost a third of the people here will be pensioners and therefore there will be fewer taxes coming in, more money going out.
It's a very difficult position that Japan is in. People have voted out a party that was in power almost without break for 50 years.
They are now looking to a new and inexperienced government to try and deal with some difficult challenges.
EXIT POLL PROJECTIONS
National broadcaster NHK: DPJ 298-329 seats; LDP 84-131
Private network TV Asahi: DPJ 315 seats
Tokyo Broadcasting System: DPJ 321 seats
Nippon Television: DPJ 324,br>
Outgoing 480-seat lower house of parliament: LDP 303; DPJ 112
Sources and Relevant Links:
BBC News 'Major win' for Japan opposition 30 August 2009