The victory of 46-year-old Obama, the first time Senator from Illinois, in Iowa caucuses on Thursday night dealt a serious blow to the bid of New York Senator Clinton to become the first US woman President while giving boost to his own chances to become the first black American to occupy the White House.

Final Democratic returns showed Obama gaining 38 per cent support. Former North Carolina Senator John Edwards, the 2004 vice presidential candidate, stood second, edging out Clinton in a tight battle.

"We are choosing hope over fear," Obama told a victory rally. "We're choosing unity over division and sending a powerful message that change is coming to America."

Shortly after her defeat, Clinton called Obama to congratulate him, according to her aides.

In a short speech at her Iowa headquarters in Des Moines, she said was "optimistic" and "confident" about the New Hampshire primary on Tuesday.

"I am so ready for the rest of this campaign (across the US) and I am so ready to lead," Clinton said, flanked by her husband and ex-president Bill Clinton and daughter Chelsea.

The victory of Huckabee, a baptist preacher turned politician, was more robust. He was winning with 34 per cent support, compared to 25 per cent for Romney.

"A new day is needed in American politics, just like a new day is needed in American government," Huckabee told his cheering supporters. "It starts here, but it doesn't end here."

In the Democratic pack of candidates, Senators Joseph Biden and Chris Dodd along with Governor Bill Richardson and Congressman Dennis Kucinich had very little to show and the expectation is that the field will get much smaller even before the showdown in New Hampshire.

Similar primaries will take place across all American states before each party backs a single candidate to contest the November election for the White House.

The Iowa caucuses and the upcoming New Hampshire primary are considered as key for building momentum in the state-by-state process of winning the presidential nomination. Candidates who do poorly tend to drop out of the race.

The two contests launch an intense, five-week period that will culminate in more than two-dozen contests on February 5.

With President George W Bush, a Republican, constitutionally barred from seeking re-election, both parties have indulged in costly and wide-open campaigns.