PORTLAND, Ore. -- Democratic challenger Jeff Merkley claimed victory over incumbent Republican Sen. Gordon Smith Thursday morning, after an extremely close race for Oregon's Senate seat.

 More: Read Smith letter

Merkley becomes the first Oregon leader in 40 years to defeat an incumbent senator. He began his victory speech Thursday by thanking Smith for his 12 years of service and then recalled a quote by President Franklin D. Roosevelt when he took office in 1933.

“FDR said, ‘Our citizens must be dedicated to a disciplined attack on our common problems,” Merkley said.

The Oregon House speaker said he had wrestled with the decision to campaign for U.S. Senate, seeking advice from his mother and wife on how to best serve the nation. He thanked his staff for running a campaign “with energy, with persistence, and with intelligence.”

Merkley went on to say the election belonged to everyone, Democrat and Republican, and congratulated President-elect Barack Obama.

“This is the beginning of a transformational change for all of America. It began with election of Barack Obama as president ... It continues with the victory in this seat, which puts 57 Senate seats in a working majority that can work with Obama to put this nation back on track,” he said.

 Click here for: Latest election results

The Democrat pleaded with Oregonians to remain “actively engaged” as citizens. He said he believes the Democratic Party has earned a “bold agenda for change,” which involves ending the Iraq War, creating affordable health care for all and giving Americans a more level opportunity at earning what he calls “a living wage.”

Merkley echoed a theme Obama had sounded during the waning days of the election campaign -- that Republicans’ philosophy of trickle-down economics had failed Americans.

“It’s time to make families first; overhaul trade and tax policies to stop sending jobs overseas, invest in our infrastructure and give 95 percent of working class families a tax cut to put economy back on track,” Merkley said.

He also said he looked forward to working with Sen. Ron Wyden, the new Democratic-controlled Senate and President-elect Obama to craft a “smart, bold energy policy” that among other things would end foreign dependence on oil and put America “on the forefront in attacking global warming.”

Photo Courtesy: JeffMerkley.com

U.S. Senator-elect Jeff Merkley, D-Ore.

Merkley will take his place in the U.S. Senate when Congress reconvenes in January 2009.

Sen. Smith is expected to offer a formal concession speech Thursday afternoon from his home in Pendleton at 2 p.m.

Merkley's margin came as Multnomah County workers plowed through the largest number of uncounted ballots in the state. Multnomah County is Merkley's home and a Democratic stronghold where he expected to pick up a winning advantage.

Early Thursday, about 80 percent of the vote statewide had been counted. Forty years ago this week, Republican Bob Packwood was declared the winner in an upset of Democratic Sen. Wayne Morse.

Merkley was riding a Democratic wave that swept the nation Tuesday.

The stakes were high, and the race's outcome watched closely by both national parties. Democrats increased their majority in the Senate to 56 seats Tuesday, but Republicans managed to stop a complete sweep.

 Map: County by County (MSNBC)

Oregon was one of four Senate races involving Republican incumbents that hadn't been decided as of early Wednesday.

A national target
The Democratic National Party targeted Smith, the lone GOP senator on the West Coast, as a vulnerable candidate. Swinging that vote to Democrats could further Democratic ambitions toward what's considered a "supermajority," giving them enough votes to defeat fillibusters on the Senate floor.

The Democratic Senatorial Campaign Committee spent more than $10 million boosting Merkley, about twice as much as the GOP campaign arm spent helping Smith.

With the stakes so high, Obama publicly endorsed Merkley and recorded the only television commercial for a local candidate throughout the campaign.

The opponents have run a fiery race, using the media spotlight to sling negative campaign adds at one another, especially as voting day got very close.

But campaign ads aside, Smith and Merkley have given voters other reasons to choose one over the other, staking out policy stands on key issues, including the economy, energy and the war in Iraq.

While Smith has a 12-year voting record to point to, Merkley has to carve out positions on national issues. On Iraq, he's called for a complete troop pull-out over the next year, and the elimination of permanent U.S. military bases in Iraq. American contractors should also leave Iraq, he's said, to be replaced with Iraqi contractors.

Smith has been more circumspect on the Iraq question after passionately breaking with the Bush administration over the war's direction in late 2006, though Democrats point out that he has continued to vote for war funding.

After being sworn in to the United States Senate on Jan. 7, 1997, Smith quickly earned a reputation as a statesman with an independent streak.

When Merkley became the first Democratic speaker of the Oregon House in 16 years, he helped lead the fight to make health care more affordable, pass new environmental legislation, and create thousands of family-wage jobs in Oregon.

The Associated Press contributed to this report.