The party’s vote collapsed in what was its fourth safest constituency as Sinn Féin’s Pearse Doherty powered to a commanding victory.
He took just under 40% of the first preference votes as Fianna Fáil saw its share plummet from 50.3% in 2007 to 21.2%.
The Sinn Féin victory — its first by-election success since 1925 — reduces the Government’s already wafer-thin majority to just two as it attempts to push through a savage budget on December 7.
The loss also presents a more immediate threat to Brian Cowen’s position as it boosts Sinn Féin’s Dáil tally to five, meaning it could now hook-up with two independents and form a technical parliamentary group with enough members to force a vote of no confidence in the Taoiseach.
While no Government has won a by-election since 1982, the scale of the collapse in the Fianna Fáil vote in a heartland seat will send deep concern through the party.
With only four in 10 of its 2007 voters standing by it, if that pattern is repeated nationally it would put the party on about 17% of the popular vote — where it was placed in recent opinion polls.
That kind of share of the vote would reduce its seat tally to somewhere in the 20s if reflected in the general election due to be held in February or March at the latest.
Mr Doherty said the Sinn Féin win was a demand for change.
“It’s a rejection of the Government’s four-year plan, of cuts to public services, social welfare and the minimum wage. It is a rejection of the ‘consensus for cuts’ among all the establishment parties — Fianna Fáil, Fine Gael and Labour.
“It is also a rejection of the interference of the IMF in Irish affairs,” he told supporters after being declared the winner.
Mr Doherty finished with 16,897 votes and was elected to the Dáil for Donegal South West, without reaching the quota.
Labour’s Frank McBrearty came a distant fifth with 10% of the first preference votes, behind an independent.
Tánaiste Mary Coughlan, who is a TD for the constituency, admitted the result meant all Fianna Fáil seats were under threat in the forthcoming general election.
Labour leader Eamon Gilmore said he was still confident of taking a seat in the general election in the constituency and Fine Gael leader Enda Kenny said his party’s candidate, put in a “very creditable” performance.