With 98 percent of precincts counted, Murkowski trailed political newcomer Joe Miller by 1,960 votes out of more than 91,000 counted. As many as 16,000 absentee votes, as well as an undetermined number of provisional or questioned ballots, remain to be counted.
Miller had 45,909 votes, 51 percent, while Murkowski had 43,949 votes, 49 percent. Miller had maintained a lead throughout the night, but his lead fluctuated as ballots were counted.
It could be a week or more before the final results of the race are known. The state Division of Elections said it had received about 7,600 absentee-type ballots by Monday. Officials plan to begin counting outstanding absentee ballots Aug. 31, and absentee ballots postmarked by election day can be received for up to 10 days after the election. State law allows for 15 days to count absentee and questioned ballots.
Miller, a decorated Gulf War veteran backed by Sarah Palin and the Tea Party Express, sought to cast Murkowski as being too liberal and part of the problem in an out-of-control Washington. It is a campaign strategy that has helped oust other incumbents this year.
Murkowski proudly touted her seniority after eight years in office and said her roles on the appropriations and energy committees put her in a strong position to ensure Alaskans' voices are heard. She was appointed to the Senate at the end of 2002 by her father and won her first term in 2004.
With supporters at election central headquarters in Anchorage chanting "Miller Time!" and "Go Joe Go!," Miller told reporters Tuesday night that he was trying to be realistic about the early results showing him slightly in the lead. He also joked on Twitter, "What's the moose hunting like in the Beltway?"
Murkowski spokesman Steve Wackowski said the campaign remained upbeat about its chances, especially with votes in rural Alaska still coming in.
"I can say we're still here waiting. That's what we're doing," Murkowski said shortly after midnight at her campaign headquarters.
Asked if she conceding, she replied, "Absolutely not."
After keeping a low profile for much of the race, Palin recorded a robocall for Miller in the final days of the campaign and touted him as a "man of the people" on her Facebook page. The former Alaska governor also repeated a claim that Murkowski had waffled on her position on repealing the federal health care overhaul - claims the senator has called false.
Palin has been on a losing streak as of late, and many were expecting similar results in Alaska, with Murkowski holding strong name-recognition and fundraising advantages.
Palin tweeted late Tuesday that she's "keeping fingers crossed" and "prayers upward" about the race.
The ex-governor and the Murkowski family have a complicated history.
Palin trounced Murkowski's father, Frank, in the 2006 gubernatorial primary - the race that would launch her national political career. Last year, she said she'd raise money for Lisa Murkowski, and even contributed to her campaign, quieting widespread speculation that Palin would challenge Murkowski for the seat. But the women have clashed on issues like health care, though they've denied any bad blood between them.
Murkowski has fought back against Miller and Palin's claims. A radio ad on the eve of the election accused Miller of twisting the truth about Murkowski's position on the federal health care overhaul. Miller has stood by his statements.
"Alaskans deserve to know the honest truth," Murkowski said, "and they haven't gotten it from Miller."
Miller had the blessing of the tea party crowd. The national Tea Party Express reported spending at least $550,000 to help him.
The race was disrupted when former Sen. Ted Stevens died in a plane crash, with both candidates briefly suspending their campaigning.
The eventual winner of the primary will face Democrat Scott McAdams.