Republican Mark Kirk on Tuesday captured the Senate seat once held by the president, dealing an embarrassing blow to Democrats.
Kirk, a five-term congressman from Chicago's northern suburbs, defeated Illinois Treasurer Alexi Giannoulias in one of the nation's ugliest and most closely watched Senate races.
Giannoulias faced attacks over his family's failed bank, which gave loans to two men involved in organized crime. Meanwhile, Kirk was forced to apologize after the disclosure that he had made false claims about his military record.
With 97 percent of precincts reporting, Kirk had 48 percent of the vote to Giannoulias' 46 percent.
The defeat is an embarrasing personal rebuke for Obama on night of Democratic defeats around the nation. Obama, his wife and top aides had campaigned hard for Giannoulias in a bid to keep the seat in Democratic hands.
The campaign turned into a bitter exchange of charges and countercharges.
Exit polling found that more than a third of Illinois voters considered neither Kirk nor Giannoulias to be honest and trustworthy.
Trust may have been especially important in the race because of its links to former Illinois Gov. Rod Blagojevich. The Democratic governor was removed from office in disgrace after federal prosecutors alleged he tried to sell the appointment as Obama's temporary Senate replacement.
Giannoulias played professional basketball in Greece and became a friend and basketball buddy of Obama's. Encouraged by the future president, he ran for Illinois treasurer and won on the strength of his experience as an executive at his family's Broadway Bank.
Four years later, he set his sights on winning Obama's former Senate seat. But his banking experience worked against him when the bank failed and was taken over by federal regulators. Giannoulias also had to explain -- again and again -- his role in the bank's loans to two people with ties to organized crime and to corrupt political insider Antoin "Tony" Rezko.
He faced Kirk, who looked like the clear favorite with his mix of moderate social views and military experience. Then came the revelation that after long saying he was the Navy's "intelligence officer of the year," Kirk never actually won that award.
It turned out that at various times Kirk also had falsely said he served in the Gulf War and the 2003 invasion of Iraq, claimed to run the Pentagon war room and said he came under enemy fire on flights over Kosovo and Iraq.
Winnetka voter Barbara Mitchel, 53, said she supports Obama but voted for Kirk.
"My vote for Republicans sends a message to Obama: You're doing a good job, but you've got to do better," she said.
But in Decatur, 48-year-old Carolyn Lowery said Obama needs more help in Washington, not more political opponents.
"I want to make sure we fill Congress with Democrats so they can overrule the Republicans. We need to make sure we have people to back Obama up. Obama's not doing a bad job," Lowery said.