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With more than 98% of the votes counted, Mr Yuschchenko is eight points ahead of the Prime Minister, Viktor Yanukovych.
The election was a re-run of a vote last month, won narrowly by Mr Yanukovych, but annulled due to fraud.
There have been accusations of dirty tricks throughout the campaign, including allegations of a plot to murder Mr Yushchenko.
Doctors recently confirmed that Mr Yushchenko, who developed a disfiguring skin condition in September, had been poisoned with dioxin.
Mass demonstrations in the capital, Kiev, against the first result have continued all month.
Mr Yushchenko declared victory at midnight GMT while counting was still in its early stages.
"Today, in Ukraine, a new political year has begun," he told a jubilant crowd of supporters.
"This is the beginning of a new epoch, the beginning of a new great democracy."
Thousands of demonstrators, many wearing the campaign's trademark orange, celebrated with a concert and fireworks display.
Many have spent the last weeks camping in Kiev's Independence Square despite sub-zero temperatures.
International observers from the Organisation for Security and Cooperation in Europe (OSCE) which is monitoring the elections say the re-run has been much fairer than the earlier rounds.
"The people of this great country made a great step forwards to free and fair elections by electing the next president of Ukraine," said the head of the OSCE monitoring mission, Bruce George.
Ukraine has been plunged into bitter political crisis over the elections.
The first election result gave Mr Yanukovych 49.46% and Mr Yushchenko 46.61%. But Western poll observers complained of serious irregularities and said the vote failed to meet international standards.
As demonstrations mounted and the political tension heightened, the Supreme Court investigated and ruled the results invalid, paving the way for fresh elections.
The outgoing Prime Minister, Viktor Yanukovych, refused to resign and appealed against the result.
However, on 30 December the Supreme Court rejected his complaints and his appeal. He finally resigned on 31 December.
The final result, declared on 11 January, gave 51.99% of the vote to Mr Yushchenko and 44.2% to Mr Yanukovych. Mr Yushchenko was sworn in on 23 January 2005.
Mr Yushchenko's victory has become known as the Orange Revolution. However his presidency has been marked by increasingly bitter in-fighting and a power struggle which led to him sacking his entire government in September 2005.
Meanwhile, the constitution is being amended to give more power to the parliament and prime minister.
The optimism that followed the Orange Revolution has faded for many Ukrainians. Economic growth has slowed and prices have risen.
In parliamentary elections in March 2006 Viktor Yanukovych's party topped polls. Yuliya Tymoshenko's took second place, leaving President Yushchenko's party trailing in third.
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