Oundle resident Charlie Best, a retired engineer, polled 160 votes more than rival Ollie Curtis, the Conservative candidate. Mr Best received 1,683 votes, with Mr Curtis receiving 1,423.
It was a huge turnaround from the May 2021 election when the-then Conservative candidate, Annabel De Capell Brooke, beat the Liberal Democrats by 1,225 votes.
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Ms De Capell Brooke resigned her seat after moving to Norfolk but she had attended just four of the 21 meetings she had been due to attend.
Mr Best, 62, said: "We've only just gone and done it! Thank you to all the team for their hard work and thank you to the people who voted for me."
The ballots were verified and counted this morning at North Northants Council's offices in Kettering after the poll yesterday of the 10,100 electors - with the turnout of 35.4 per cent.
Mr Best, who has lived in Oundle for 26 years, said: "The Conservative councillors have been in for the past eight to nine months and we've heard nothing from them.
"On the doorsteps it felt different. A lot of people said 'I always vote Conservative but I'm not going to now'. Some did it as a protest vote and some have genuinely switched off and realised that the old Conservatism is gone."
Mr Best has promised to campaign for the people of Oundle and turn up to meetings.
He said: "When I was a school governor and a town councillor I don't remember missing many meetings. It's good that I have retired so I've got the time to devote.
"I will be addressing issues such as the St Christopher's Drive development and the crumbling pavements. I hope to use my experience in industry to help make efficiencies."
Conservative supporters, including Tom Pursglove, MP for Corby, and Wellingborough MP Peter Bone had been campaigning hard throughout the area.
Fellow Oundle ward councillor and leader of North Northants Council Jason Smithers was at the count to support candidate Ollie Curtis.
Cllr Smithers said: "We're disappointed. However, it's a clear message from the electorate that they expect more. I will take that back to the group when we meet on Monday.
"Congratulations to the Liberal Democrats. I look forward to working with them.
"Canvassing was relatively positive. It's a very close result - the traditional voters may not have come out with all this windy weather. Did more Liberal Democrats come out - clearly they did. It's really hard to draw a conclusion.
"It comes down to people on the day. We live in worrying times. It's not because of Boris - it would be for anyone who was in government.
"We still have a large majority. Diversity is a good thing in local politics."
Liberal Democrat agent Chris Stanbra said: "I want to congratulate Charlie for being a great candidate. I want to thank the people of Oundle for putting their trust in him.
"He will not let them down."
The results for Oundle Ward by-election results: Charlie Best (Lib Dem) - 1683 Ollie Curtis (Con) - 1423 Harry Edward James (Lab) - 337 Kate Jones (Green) - 124