OLYMPIA, Wash. -- Republican Dino Rossi has conceded a hard-fought battle for the governor's office.

At a Wednesday news conference in Redmond, Rossi said he ran a "fantastic campaign" but the gap between him and Gov. Chris Gregoire was too large to overcome.

RAW VIDEO: Complete Rossi Concession Speech, News Conference
RAW VIDEO: Complete Campaign Wrap-Up Speech By Gregoire

Gregoire held a news conference in Seattle put the cap on her re-election following Rossi's announcement. She thanked her supporters and voters and said she's excited to work with a Barack Obama administration and "proud to serve as governor."

Gregoire declared victory Tuesday night after early returns had her ahead, but Rossi initially said he wanted to see later returns.

Wednesday morning, with about 55 percent of the expected ballots counted, Gregoire had about 54 percent of the vote compared with Rossi's 47 percent.

In Pierce County, election workers were on duty all night, counting ballots. See video

Unlike 2004, when Rossi took an early lead on Election Night, Gregoire jumped out front early and hung on.

"I think people came into this race with the frame of mind of the last race," independent pollster Stuart Elway said. "Everyone expected it to be a 133-vote race, but it was never going to be that."

Gregoire beat Rossi four years ago by the closest percentage margin of any governor's race in U.S. history -- just 133 votes out of about 2.8 million cast, after two recounts and an unsuccessful Republican court challenge.

RAW VIDEO: Gregoire's Election-Night Speech to Supporters
RAW VIDEO: Rossi's Election-Night Speech To Supporters

That loss has been simmering with Republicans for years, and Rossi wouldn't concede until he was ready.

"We saw in 2004 and again in the primary this year that later votes cast and counted trended heavily toward Dino Rossi," Rossi spokeswoman Jill Strait said in a statement. "If that happens again in this general election the results will change."

Rossi and Gregoire had a bruising campaign, raising more than $20 million combined in the most expensive election in Washington history. That amount doesn't include the millions spent by third-party groups on TV ads and mailers, most of them negative in tone.

In her victory speech at the Westin hotel in Seattle, Gregoire noted "all of the negative ads are down" to loud cheers.

"It is time for us to come together as one great state," she said, and thanked and congratulated Rossi.

She also thanked voters "for participating in history" and said she looked forward to working with president-elect Barack Obama in January.

Obama captured Washington state's 11 electoral votes Tuesday, and his popularity here, along with the surge in new voters, may have been key to her success.

"The blue wave has swept into Washington and helped her candidacy," Elway said.

Another major difference this year was the absence of a third party candidate to siphon votes. In 2004, Libertarian Ruth Bennett got more than 2 percent of the vote in November, about 63,000 votes.

Voting began in mid-October. Because the vast majority of voters cast mail ballots, many of which come in on or after Election Day, many people, including the candidates, were expecting that a final result might not be known for days.

Four years ago, Rossi was ahead by 681 votes at the end of Election Day. Gregoire jumped ahead of him in the following days, but 15 days after the election, it appeared Gregoire had lost by just 261 votes. A machine recount narrowed that lead to 42 votes.

A second recount, done by hand and paid for by state Democrats, put Gregoire ahead by 129 votes. The state Republican Party sued, but Gregoire was inaugurated and the court challenge ultimately failed -- although the judge threw out four illegally cast votes for Rossi, raising Gregoire's margin of victory to 133.

Matt Barreto, a political scientist at the University of Washington, said that Gregoire did much better this time in Eastern Washington, and in other swing counties like Pierce and Snohomish, which she lost in 2004.

Gregoire was ahead Tuesday in 16 of the state's 39 counties, including eight counties that she lost four years earlier.

She lost Snohomish County by 6,400 votes in 2004. With more than half of that county's vote counted Tuesday night, Gregoire was leading Rossi by more than 20,000 votes.

State Democratic Party spokesman Kelly Steele said Gregoire's strong showing "validates her first term and what she's accomplished."

Exit polling found that Gregoire attracted more women, moderates and college-educated voters, while Rossi found core support in small cities and rural areas, east of the Cascades and among those who weren't college-educated.

Rossi didn't get the crossover from Obama voters as he had hoped. Only one in 10 of those who voted for Rossi also voted for Obama.

Independents, surbanites, men and wealthy voters were split between the two candidates.