Cruz, Texas, made good on his bet that a methodical campaign organization would eclipse Trump's media dominance in the first test of GOP voters. With 99 percent of the precincts reporting, Cruz was besting his rival by more than 5,100 votes, with fellow senator Marco Rubio of Florida a close third.
Cruz appeared to capitalize on deep support from religious and social conservatives and showed that old-fashioned retail politicking could overcome Trump's massive political rallies in the Hawkeye state.
Cruz took the stage at his campaign's Iowa headquarters, where supporters were in party mode, at 10:18 p.m. Central time. He embraced his wife, Heidi, before taking the microphone to address the crowd, which held Cruz signs and camera phones aloft.
"God bless the great state of Iowa," he said. "Tonight is a victory for the grass roots. Tonight is a victory for courageous conservatives across Iowa and all across this great nation. Iowa has sent notice that the Republican nominee and the next president of the United States will not be chosen by the media; will not be chosen by the Washington establishment; will not be chosen by the lobbyists."
Clinton, joined by her husband, former president Bill Clinton, and daughter Chelsea, addressed before supporters even before the final tally was in, saying she was "breathing a sigh of relief."
"It is rare that we have the opportunity we have now to have a real contest of ideas, to really think hard about what the Democratic Party stands for," Clinton said. "I am excited about really getting into the debate with Senator Sanders about the best way forward to fight for us and America."
The night also began to winnow the field on both sides. Former Maryland governor Martin O'Malley, the only other major Democratic candidate, had negligible support and suspended his campaign Monday night, according to a person close to his campaign. Former Arkansas governor Mike Huckabee also suspended his GOP campaign.
The crowded Republican field and lively debates appeared to boost interest in the race. In all, a record 185,000 people took part in the GOP caucuses, smashing the 2012 turnout by 5.4 percent, according to estimates from Edison Media Research.
Appearing before supporters at his Iowa headquarters, Trump congratulated Cruz, but he reminded his audience of how far he had come.
"On June 16, when I started this journey, there were 17 candidates. I was told by everybody, 'Do not go to Iowa. You could never finish even in the top 10,'" Trump said. "We finished second. . . . We will go on to get the Republican nomination, and we will go on to beat Hillary or Bernie or whoever they throw up there."
Cruz, who had surged to a polling lead in Iowa by December but fell behind again to Trump in the final days, outperformed his final polling results in Iowa. Aides touted a strong ground game in which the senator appeared at events in all 99 counties. Cruz had 28 percent of the vote, with Trump at 24 percent and Rubio at 23.
Supporters at Cruz headquarters cheered loudly when their candidate was shown on a giant video screen. A cover band played songs of Patsy Cline and Johnny Cash, as the audience exchanged hi-fives and hoisted drinks.
"That's priceless. You're fired!" said Cruz precinct captain Ted Sturgill, using Trump's catch-phrase from "The Apprentice" television show against him.
Rubio did far better than expected, with a late rally of support as he sought to consolidate support among establishment Republicans who have doubted Trump and Cruz. Former Florida governor Jeb Bush, who started the campaign as a prohibitive front-runner and a massive campaign warchest, finished way back in the pack. Bush wasn't even in the state on Monday, campaigning instead in New Hampshire, whose primaries will be held next week.
"They told me I needed to wait my turn, that I needed to wait in line," Rubio told an enthusiastic crowd at his Iowa headquarters.
"This is your turn!" a supporter responded.
"Tonight here in Iowa, the people in this great state sent a very clear message that after seven years of Barack Obama, we are not waiting any longer to take our country back," Rubio said.
"I pray we will win," Cruz said during a stop at a Baptist Church in Marion, Iowa.
Trump and Sanders made their final pushes Monday to coax non-traditional voters to the caucuses here, even as their chief rivals suggested well-tested organizing tactics would give them the crucial margin of victory instead.
Television networks showed Trump, in a solid red tie, visiting a caucus site in West Des Moines with wife, Melania, in a matching all-red ensemble, and taking a seat in the front row. One woman approached and posed with him for a selfie photo on her mobile phone.
"We are going to bring our country back," Trump told the caucus crowd, speaking into a microphone. Reflecting on a campaign that was dismissed early on by the political establishment in Washington, Trump said: "It's really been a journey, an amazing journey. I'm a messenger. We're going to run it the way it's supposed to be run--as a great, great country."
There was little question that the lack of an incumbent candidate, coupled with the unconventional style of several candidates, has sparked Iowans' interest in the race this year. Jeff Kaufmann, who chairs the Iowa Republican Party, said his office has been receiving five to six times as many calls compared to past years.
"The phone calls at the Republican Party of Iowa headquarters are absolutely unprecedented. I mean, we're looking at 100 an hour, literally," he said. "Now, obviously, not all of that is tied to Donald Trump. There's also a lot of these calls that are going to a variety of candidates. But I think that's a sign of the enthusiasm."
Iowa Gov. Terry Branstad (R) echoed that assessment in an interview, saying Trump has "turned out bigger crowds than we've ever seen before."
"I know everybody is saying, 'Are they just coming for curiosity?' But I think they're for real; they're committed and will show up for caucuses. I do," Branstad said. "I've been pretty impressed with what they've done.
"Of course we saw this phenomenon eight years ago with Obama," he said, referring to President Barack Obama's first White House bid. "It was beyond what anyone could have imagined, and I think Trump is a phenomenon, too."
Sanders was encircled by volunteers and a crush of reporters as he arrived late Monday morning at his Iowa headquarters in a strip shopping center outside downtown Des Moines.
"We have come a long, long way in the last nine months," the Vermont senator told his supporters. "You've got a tied ball game, that's where we are."
Sanders also pushed back against critics who've suggested his agenda is too radical. "Our platform, our agenda, is precisely what the American people want," he said.
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