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He will be inaugurated as London's first elected mayor in July heading an assembly of 25 newly elected members known as the Greater London Authority.
In what was a stinging defeat for the government, Mr Livingstone polled nearly 40% of first preferences in the mayoral election.
His Conservative rival Steve Norris attracted 26.5%, with Labour's Frank Dobson, the prime minister's preferred candidate, on just 12.78% and Liberal Democrat Susan Kramer behind him on 11.6%.
An emotional Mr Livingstone, who was thrown out of the Labour Party after choosing to run as an independent when he failed to be selected as Labour's official candidate, praised his opponents and said he would invite them to work in his new administration.
He said: "In particular I want to say a word to my old colleague and friend Frank Dobson, who has borne a terrible brunt of odium which was not his but should have been rightly reserved for people who work behind the scenes."
Mr Dobson said he accepted his share of Labour's failure, but said he hoped he had not let too many people down.
The prime minister, Tony Blair, urged Mr Livingstone to work with the government, but added that his views about the left-wing MP - who he had said would be a "disaster" for London - had not changed.
Mr Blair made it clear Mr Livingstone would not be allowed to return to Labour after standing against an official party candidate.
Both Mr Dobson and Ms Kramer were eliminated from the contest after the first round, with their second preference votes then redistributed to Mr Livingstone and Mr Norris.
Mr Dobson's humiliation in the mayoral poll was underlined as he came fourth in the mayoral contest in Barnet and Camden - the seat which includes his parliamentary constituency.
In the elections for the 25 Greater London Assembly constituency seats, the Tories and Labour both won nine and the Liberal Democrats won four, while the Green Party picked up three seats.
Ken Livingstone came to be known as Red Ken for his far-left policies as leader of the Greater London Council before it was abolished in 1986. Fourteen years on he had become a kind of folk hero and the man most reviled by the political establishment.
During his inaugural speech as London mayor in July 2000, he said his first priority was transport and that he would fight government plans to part-privatise the London Underground.
But one year later he lost a legal battle to prevent this happening.
In the same month he announced plans for congestion charges of £5 to be introduced in central London from 2003. The much-criticised scheme proved to be a success.
Throughout his time in office he tried and failed to rejoin the Labour Party.
Then in January 2004 he was allowed back into the party and the Prime Minister Tony Blair admitted his prediction that Mr Livingstone would be a "disaster" for London had been proved wrong.
Frank Dobson, who was chosen by Labour as mayoral candidate in what many saw as a rigged selection process, never fully recovered from the experience and although still in politics has kept a low profile.
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