Margaret Greenwood won in Wirral West after securing 18,898 votes - just 417 more than Ms McVey.
Wirral West was one of the key marginal seats in the North West, with Ms McVey the Tories' sole Westminster representative from Merseyside.
"I was the only Conservative MP on Merseyside and it shows we have a lot more to do," she said.
"You have your highs and lows in politics, but I'm going to pick myself up, dust myself down, and I'm going back out there to become an MP because I believe in the Conservative party and all it stands for - you ain't seen the last of me yet."
Former NHS campaigner Ms Greenwood said: "It's just a fantastic result. We've worked phenomenally hard."
She added: "We are all thrilled. It's been about talking to people on their doorsteps. We've had about 13,000 conversations with people during this campaign."
Nigel Evans, Conservative MP for Ribble Valley, called for the Prime Minister to appoint Ms McVey into the House of Lords.
He said: "She is top quality and we can't afford to lose that sort of talent, I think she would make a great contribution from the other place."
Ms McVey was born in Liverpool and rose to become a cabinet minister after a career as a TV presenter.
Elsewhere, Labour held Bootle, with Sefton council leader Peter Down becoming MP and winning a massive majority with 33,619 of the votes.
UKIP deputy leader Paul Nuttall came in second, but was way behind with 4,915 votes.
Across Merseyside, Labour hung on to seats in Birkenhead, Garston & Halewood, Knowsley, Liverpool Riverside, Liverpool Walton, Liverpool Wavertree, Liverpool West Derby, St Helens North, St Helens South & Whiston, Sefton Central, Wallasey and Wirral South.
While the Tories were wiped out on Merseyside, the Liberal Democrats retained the sole seat of Southport.
To find out your election result, go to BBC Election 2015.

Spratt, 25, joins on a one-year deal, and Samson, 23, on a two-year-deal.
Wales international Spratt said: "I'm excited to be joining London Irish. They play an exciting brand of rugby that appeals to me."
Samson, who has played for Scotland at U20 level, said: "I've enjoyed my time at Edinburgh but a chance to play in the Premiership was not to be missed."
The duo will join the Exiles squad this summer for pre-season training.
Jonathan is a strong, powerful runner, with great feet and good distribution skills.
Spratt made his Wales debut in 2009 in a Test against Canada.
The centre also played for Taranaki in New Zealand's domestic rugby tournament, the Air New Zealand Cup in 2008.
He has not played for Ospreys this season, having damaged his anterior cruciate ligament in pre-season, on his return from an earlier injury.
Samson is a product of Newcastle Falcons' academy and has represented Scotland at all age-group levels.
The Edinburgh-born scrum-half featured in the IRB Junior World Championship in 2008 and this season's IRB sevens circuit tournament.
Ross has a strong pass on him, an eye for the gap and he reads the game well.
London Irish head coach Toby Booth said: "Jonathan is a highly talented young player and another very useful addition to our squad.
"He is a strong, powerful runner, with great feet and good distribution skills.
"Ross is an exciting young talent in Scottish rugby. He has a strong pass on him, an eye for the gap and he reads the game well."

16 April 2016 Last updated at 08:16 BST
Gusts of more than 75 miles per hour were recorded and it became very hard for people to see what was going around them.
Watch the video to see the sandstorm sweep over the province.
The Conservative employment minister Esther McVey has narrowly lost her Merseyside seat to Labour.
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London Irish have signed Ospreys centre Jonathan Spratt and Edinburgh Rugby scrum-half Ross Samson.
[NEXT_CONCEPT]
A huge sandstorm hit China's Gansu Province on Friday afternoon, filling the skies with dust.