Government-backed candidate Georgia Tree conceded on Sunday after her One Nation opponent Luke Herdegen claimed a state by-election victory the night before.
Voters delivered an 18.6 per cent swing against Labor in the outer Perth electorate of Secret Harbour, handing One Nation its first lower-house seat in the state.
WA Premier Roger Cook, whose party still enjoys an overwhelming parliamentary majority, said the result was a reminder that many people were struggling with high living costs.
"The voters of Secret Harbour have spoken and we will listen," he said.
"My team will continue to get out and talk to our communities, listen to their concerns and do everything within our powers to make their lives better."
People needed to take the electoral threat posted by One Nation seriously given the party now enjoyed support from a large part of the community, the premier added.
One Nation federal MP Barnaby Joyce said the party's success in WA sent another strong message to Canberra.
"The world's changed, hasn't it, politics has changed," he told News24.
"What we've seen there is quite a number of people who basically would have been former Labor Party voters ... they find it easy to make the jump to One Nation."
With about three-quarters of ballots counted, Mr Herdegen had secured 39.1 per cent of first preference results, ahead of Ms Tree's 24.4 per cent and Liberal candidate Ryan Robertson's 17.3 per cent share.
WA One Nation leader Rod Caddies noted the historic moment as he declared "the two-party system is dead".
"You're witnessing a result they said was impossible," he said.
"Labor have owned this part of Perth. But a safe seat does not stay safe if you ignore it long enough."
Mr Joyce said traditional Labor-held seats could no longer be taken for granted.
"If you think 'oh, these people will just vote for me', then that's a sense of arrogance and arrogance will get your political hide delivered to you on a plate," he said.
Opposition home affairs spokesman Johnathon Duniam said the Liberals should not have admitted the by-election would be a challenge for the party before it even took place.
"When we start talking about conceding or coming in second or finding ways to work with other people before we've even run the race, then yeah, people are not going to back us," he said.
"We've got to fight hard and we've got to give people a reason to vote for us."
One Nation's performance in WA has been closely watched across the nation, particularly in Victoria and NSW, where state elections are due in November and March respectively.
Cost-of-living pressures, housing shortages and a perceived lack of community amenities topped the list of concerns for voters in Secret Harbour.
Local Luke Pors voted for One Nation, believing the minor party would do a better job than either Labor or the Liberals.
"We know what their true goal is and I think just in One Nation we trust," he said.
The WA result follows One Nation securing four lower-house seats in South Australia's March state election, the first lower-house spots the party had ever secured outside of Queensland.
The anti-immigration party also won a maiden lower-house seat in the federal parliament in May when it triumphed in the Farrer by-election.
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