In a stunning setback for President George W Bush [Images] and his Republican party, Democrats took control of both the House of Representatives and Senate in US Congressional polls as the tight race for a Senate seat in Virginia went in their favour.

The Democrats completed their total control of Congress by defeating incumbent Republican Senator of Virginia George Allen, who made a racial slur against a young Indian American during his campaign.

Virginia's Democratic Senate candidate James Webb claimed the title of senator-elect and began organising his congressional staff, US media said.

"The vote's been counted and we won," Webb declared. Democrats on Wednesday gained control of the House of Representatives for the first time in 12 years and the poll results were widely seen as a referendum on the war in Iraq.

Defence Secretary Donald Rumsfeld, who came in for severe criticism for the conduct of the war in Iraq, has resigned and is being replaced by former CIA Director Robert Gates.

Addressing the media, Bush announced Rumsfeld's exit after acknowledging that his administration's handling of the Iraq war played a major role in giving the Democrats control of the House of Representatives.

Bush also accepted responsibility for the Republican drubbing and admitted the result reflected the "displeasure" at the lack of progress in the war in Iraq.