Updated: 12:09 a.m.

Democrat Kathy Hochul scored an improbable victory Tuesday in western New York, handing an embarrassing special election loss to local Republicans while frustrating the national GOP establishment and its allies, who invested millions of dollars in the contest.

Hochul, who now takes the 26th district seat vacated by Rep. Chris Lee (R), earned 47 percent of the vote compared with 43 percent for Republican Jane Corwin with 97 percent of precincts reporting, according to the Buffalo News. Third-party candidate Jack Davis, who will be forever labeled by Republicans as the spoiler, earned 9 percent.

“Tonight we showed that voters are really willing to look beyond a party label and vote for the person and a message they believe in,” Hochul said in her victory speech. “And we showed that thousands and thousands and thousands of voters are more powerful than millions and millions of dollars in special interest money.”

Democrats cheered the outcome as the direct result of voter dissatisfaction with the House Republican budget plan, which Corwin supported and would fundamentally reshape Medicare. Republicans largely blamed the loss on Davis, a former Democrat who occupied the Tea Party ballot line and spent more than $2.5 million from his personal fortune on a campaign that ultimately siphoned votes away from Corwin.

Steven Law, president and CEO of American Crossroads, a conservative political organization that spent hundreds of thousands of dollars in the race in an attempt to buoy Corwin, warned Republicans that the race could be a harbinger for 2012.

“The debate over whether Medicare mattered more than a third-party candidate who split the Republican vote is mostly a partisan Rorschach Test,” Law said in a statement. “What is clear is that this election is a wake-up call for anyone who thinks that 2012 will be just like 2010. It’s going to be a tougher environment, Democrats will be more competitive, and we need to play at the top of our game to win big next year.”

But National Republican Congressional Committee Chairman Pete Sessions contended that the race set no precedent.

“Obviously, each side would rather win a special election than lose, but to predict the future based on the results of this unusual race is naive and risky,” the Texas Republican said in a statement. “History shows one important fact: the results of competitive special elections from Hawaii to New York are poor indicators of broader trends or future general election outcomes. If special elections were an early warning system, they sure failed to alert the Democrats of the political tsunami that flooded their ranks in 2010.”

The special election, called in the wake of Lee’s abrupt resignation in February, was never supposed to be this close.

Corwin, an independently wealthy state lawmaker, was long considered the frontrunner in what is among the most conservative districts in the state. Democrats, in fact, were initially reluctant to help Hochul for fear of raising expectations and wasting resources on a seat that was considered a long shot at best.

But Republicans in Washington quietly sensed danger weeks ago. And by early May, the NRCC and conservative groups such as American Crossroads began pouring hundreds of thousands of dollars into the district to rescue a foundering Corwin campaign.

Crossroads alone dumped $700,000 into the effort to supplement Corwin’s personal investment of nearly $3 million.

Hochul’s victory will be celebrated by Democrats, who believe the Medicare issue will play prominently in campaigns across the country over the next 18 months.

“We served notice to the Republicans that we will fight them anywhere in America when it comes to defending and strengthening Medicare,” Democratic Congressional Campaign Committee Chairman Steve Israel (N.Y.) said in a statement Tuesday night. “Even in one of the most Republican districts, seniors and independent voters rejected the Republican plan to end Medicare. The American people will continue to hold House Republicans accountable for their plan to end Medicare from now until election day 2012.”

Less than an hour after the Associated Press called the race, House Minority Leader Nancy Pelosi seized on the Democratic victory to help raise money.

“This is our third straight special election victory in New York — and it is truly one for the ages,” the California Democrat and former Speaker wrote in an email for the DCCC. “All of the Republicans’ right-wing outside groups with their secret money and dishonest attacks were no match for the combined strength of grassroots Democrats.”

At the bottom of the message, supporters were offered a link to a donation page.

But in western New York, the win will likely be short-lived, and Republicans are quick to say that Democrats are simply renting the seat.

There is little chance that Hochul would win a traditional two-way race next year in the conservative region, and it’s likely that the 26th district seat will disappear in 2012 as a result of redistricting anyway. New York is set to lose two Congressional seats because of population losses, and Hochul is an easy target for state lawmakers.

The results of Tuesday’s election won’t be formally certified by the state Board of Elections for days. Corwin sought and obtained a court order barring certification pending a hearing before a judge.

However, Corwin conceded the race Tuesday night, the Buffalo News reported. “I told [Hochul] I would be happy to help in any way I can to help western New York,” she said.

Davis also conceded. “I didn’t get the message out this time,” he said, the Buffalo News reported. “I’ll keep shouting it. I love America.”