Margaret Greenwood won in Wirral West after securing 18,898 votes - just 417 more than Ms McVey.
Wirral West was one of the key marginal seats in the North West, with Ms McVey the Tories' sole Westminster representative from Merseyside.
"I was the only Conservative MP on Merseyside and it shows we have a lot more to do," she said.
"You have your highs and lows in politics, but I'm going to pick myself up, dust myself down, and I'm going back out there to become an MP because I believe in the Conservative party and all it stands for - you ain't seen the last of me yet."
Former NHS campaigner Ms Greenwood said: "It's just a fantastic result. We've worked phenomenally hard."
She added: "We are all thrilled. It's been about talking to people on their doorsteps. We've had about 13,000 conversations with people during this campaign."
Nigel Evans, Conservative MP for Ribble Valley, called for the Prime Minister to appoint Ms McVey into the House of Lords.
He said: "She is top quality and we can't afford to lose that sort of talent, I think she would make a great contribution from the other place."
Ms McVey was born in Liverpool and rose to become a cabinet minister after a career as a TV presenter.
Elsewhere, Labour held Bootle, with Sefton council leader Peter Down becoming MP and winning a massive majority with 33,619 of the votes.
UKIP deputy leader Paul Nuttall came in second, but was way behind with 4,915 votes.
Across Merseyside, Labour hung on to seats in Birkenhead, Garston & Halewood, Knowsley, Liverpool Riverside, Liverpool Walton, Liverpool Wavertree, Liverpool West Derby, St Helens North, St Helens South & Whiston, Sefton Central, Wallasey and Wirral South.
While the Tories were wiped out on Merseyside, the Liberal Democrats retained the sole seat of Southport.
To find out your election result, go to BBC Election 2015.
The Conservative employment minister Esther McVey has narrowly lost her Merseyside seat to Labour.