It was not clear whether the scale of the losses would increase pressure on its new, leftist leader Jeremy Corbyn from centrists fearing a swing back to old-style socialist policies.
While the party, Britain's official opposition, fared poorly in some of dozens of contests in Scotland, Wales, parts of England and Northern Ireland, it looked set to win London's mayoral election, where former human rights lawyer Sadiq Khan was expected to become the first Muslim to take the post.
The ruling Conservatives failed to make any big gains in England and Wales, but made good headway in Scotland where partial results show it may leap-frog Labor as the second party of the Scottish National Party.
Britons voted Thursday to elect new devolved authorities in Scotland and Wales, more than 2,700 local officials across England and a new mayor of London.
Corbyn has struggled to hold his Labor Party together after he was elected as leader in September on a wave of enthusiasm, particularly among younger voters, for change and an end to 'establishment politics'.
But his left-leaning stance has jarred with several lawmakers in parliament, some of whom have been looking into ways to topple Corbyn despite his strong backing from a major funder to the Labor Party, the trade unions.
Some Labor lawmakers said the results, which saw the party set to fall into third place in Scotland in the devolved Scottish parliament, should force Corbyn to try to widen his appeal.
"I think that the reality is that people aren't listening to us any more (...) and we have to earn that right again," said Anas Sarwar, newly elected Scottish Labor lawmaker.
"We have a problem with connecting with certain parts of the electorate and I think that's a fundamental problem."
With nearly two-thirds of the results declared, there was little change in England, with Labor losing nine percent of its share of the vote in Scotland and losing some ground in Wales.
In London, Khan, 45, the son of an immigrant bus driver, was up against Conservative Zac Goldsmith, 41, the elite-educated son of a billionaire financier.
The winner will replace Boris Johnson, the Conservative who has run the city of 8.6 million people for eight years. A top campaigner for Britain to leave the European Union, Johnson is seen as a contender to succeed David Cameron as party leader and prime minister.
Khan has a big lead in the opinion polls, despite accusations by Goldsmith that he has shared platforms with radical Muslim speakers and given "oxygen" to extremists - charges he has denied.