United Russia won about 50 percent of Sunday's vote, a result that opposition politicians and election monitors said was inflated because of ballot-box stuffing and other vote fraud. It was a significant drop from the last election, when the party took 64 percent.
Pragmatically, the loss of seats in the State Duma appears to mean little because two of the three other parties winning seats have been reliable supporters of government legislation. Nevertheless, it was a big symbolic blow to a party that had become virtually indistinguishable from the state itself.
The result has also energized the opposition and poses a challenge to Putin, the country's dominant figure, in his drive to return to the presidency.
Putin, who became prime minister in 2008 because of presidential term limits, will run for a third term in March. Some opposition leaders saw the parliamentary election as a game-changer for what had been presumed to be his easy stroll back to the Kremlin.
More than 400 Communist Party supporters also gathered Monday to express indignation over the election, which some called the dirtiest in modern Russian history. The Communists finished second with about 20 percent of the vote.
"Even compared to the 2007 elections, violations by the authorities and the government bodies that actually control the work of all election organizations at all levels, from local to central, were so obvious and so brazen," said Yevgeny Dorovin, a member of the party's central committee.
Putin appeared subdued and glum even as he insisted at a cabinet meeting Monday that the result "gives United Russia the possibility to work calmly and smoothly."
Although the sharp decline for United Russia could lead Putin and the party to try to portray the election as genuinely democratic, the wide reports of violations have undermined that attempt at spin.
Boris Nemtsov, a prominent figure among Russia's beleaguered liberal opposition, declared that the vote spelled the end of Putin's "honeymoon" with the nation and predicted that his rule would soon "collapse like a house of cards."
Many Russians have come to despise United Russia, seeing it as the engine of corruption. The balloting showed voters that they have power despite what election monitors called a dishonest count.
"Yesterday, it was proven by these voters that not everything was fixed, that the result really matters," said Tiny Kox, of the Council of Europe's Parliamentary Assembly, part of an international election observer mission.
Other analysts suggested the vote was a wake-up call to Putin that he had lost touch with the country. In the early part of his presidency, Putin's appeal came largely from his man-of-the-people image: candid, decisive and without ostentatious tastes.
He seemed to lose some of the common touch, appearing in well-staged but increasingly preposterous heroic photo opportunities - hunting a whale with a crossbow, fishing while bare-chested, and purportedly discovering ancient Greek artifacts while scuba diving. Russians grew angry at his apparent disregard, and even encouragement, of the country's corruption and massive income gap.
Only seven parties were allowed to field candidates for parliament this year, while the most vocal opposition groups were barred from the race. International monitors said the election administration lacked independence, most media were biased, and state authorities interfered unduly at different levels.
"To me, this election was like a game in which only some players are allowed to compete," said Heidi Tagliavini, the head of the observer mission of the Organization for Security and Cooperation in Europe.
Of the 150 polling stations where the counting was observed, "34 were assessed to be very bad," Tagliavini said.
U.S. Secretary of State Hillary Rodham Clinton said Washington has "serious concerns" about the elections.
"Russian voters deserve a full investigation of all credible reports of electoral fraud and manipulation, and we hope in particular that the Russian authorities will take action" on reports that come forward, Clinton said.