Following Jill Mortimer’s Parliamentary by-election victory on Thursday, they are now also the party with the most councillors on Hartlepool Borough Council after winning 13 of the 36 seats contested.
The results, which were delayed until Saturday because of the by-election count, saw Labour win 11 seats.
Nineteen seats were required for an overall majority and so talks to see if two or more groups of councillors can form a coalition are now possible.
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Councillor Mike Young, the group leader for Hartlepool Conservatives, said the party ran "fantastic" campaigns nationally, regionally and locally.
He added: "The people have spoken, Hartlepool has said exactly what they've been saying for a long time, they're looking for a change, they're looking for something new and it's down to us to deliver.
"Let's talk Hartlepool up, too long it's been where we've talked it down and people are fed up of that message."
He added it was "very early days" to be talking about coalitions and first they will reflect on the election.
He said: "It's been forever since we've had this position, to do anything knee jerk is ridiculous.
"We're going to level up and we're going to build back better. With this kind of turnout we've got a massive opportunity to do that."
The party added to their existing four seats by winning one in each of the Burn Valley, De Bruce, Fens and Greatham, Foggy Furze, Headland and Harbour, Manor House, Rossmere, Seaton and Victoria wards.
Labour also increased the number of seats they had on the council from six to 11.
There was drama surrounding one of the two seats they gained in Rossmere as Moss Body and Julie Clayton both recorded 558 votes.
Cllr Boddy won after straws were drawn.
Labour group leader Cllr Brenda Harrison said, despite the improved showing, that people in the town have made a statement.
She added: "It's nearly double what we had before the election, we have some really committed people for Labour on the council.
"We will listen to the people of Hartlepool, who have obviously made quite a statement over the last few days, as to what they want."
Council leader Cllr Shane Moore, for the Hartlepool Independent Union, retained his seat in Headland and Harbour, along with Tim Fleming, although they lost their three other seats.
He said he would be interested in again working with Conservative councillors, who the group has been in coalition with since 2019, adding: "We've lost some good councillors unfortunately, but I'm sure we've gained some great new councillors as well.
"The current coalition has worked extremely well together. We put party politics aside and we have delivered a lot over the past two years, and I think there is a willingness to continue with that."
Reform UK's Cllr John Tennant, chair of neighbourhood services committee, left the election without a seat after losing out in the newly created Throston ward.
Despite standing 15 candidates, the second most after Labour, the Veterans' and People's Party also left without a seat.
Ten independents were elected, including former ceremonial mayor Rob Cook in Hart, after previously losing his seat in De Bruce for Labour in 2019.