LONDON - Tony Blair weathered a backlash over the Iraq war to win a historic third term as Britain's prime minister, but his Labour Party suffered a sharply reduced parliamentary majority that could weaken his mandate and force him to step aside before his term ends.

Labour's majority in the House of Commons decreased from 161 seats before the election to about 60, according to the latest results.

With the count still incomplete, but Labour's majority assured, Queen Elizabeth II confirmed Blair as the winner this morning. On his return from Buckingham Palace, he acknowledged Iraq had been a setback.

"I know that Iraq has been a deeply divisive issue in this country," he said afterward, speaking outside his Downing Street office. "But I also know and believe that after this election people want to move on, they want to focus on the future in Iraqi, and here."

Later today, Conservative Party leader Michael Howard said he planned to step down because "I did not achieve what I set out to achieve."

Under Howard, the Tories added more than 30 seats to their total of 160 in the last Parliament.

Labour needed at least 324 seats to form a majority in the 646-seat House of Commons. With 622 seats reporting, Labour had 353 seats, the main opposition Conservatives 196, Liberal Democrats 61, and independents and smaller parties 12.

The slip in Labour's lead could loosen Blair's grip on power and prompt calls for him to step down before serving out a full five-year term. His Cabinet colleague and rival, powerful Treasury chief Gordon Brown, is widely regarded as his likely successor.

"I think we can be really proud of what we've achieved," Blair, who turned 52 today, told supporters on his return from Sedgefield to London. "We've got a mandate to govern this country again."

Blair today promised "radical" legislation on health, education and law and order.

The margin of Labour victory could have consequences for Britain's "special relationship" with the United States. The battering Blair took over Iraq during the campaign suggested that any future British leader will probably be wary of backing Washington militarily in the face of hostile domestic opinion.

"One of the conclusions of this is that he (Blair) certainly does not have a mandate to launch another war along with George Bush," said Robin Cook, who resigned from Blair's Cabinet in opposition to the war.