The Guatemalan Republican Front accepted defeat on Tuesday ending Rios Montt's hopes of regaining power through the ballot box.
It was a crushing defeat for the fiery 77-year-old former general, who spent the past few years planning a return to power at the ballot box.
The ruling party, known by its Spanish initials FRG, had remained quiet since Sunday's vote, only Guatemala's second presidential election since the end of its 36-year civil war.
That had raised fears its supporters might protest results showing Rios Montt finishing third, out of next month's run-off between the top two candidates.
Edin Barrientos, who was Rios Montt's vice presidential running mate, said on Tuesday the party accepted defeat.
"Of course we accept the results. The election is an expression of the people and the people didn't vote for us," Barrientos told Reuters.
"For the United States, it is important I state clearly that support for military forces and intelligence units which engaged in violence and widespread repression was wrong and the United States must not repeat that mistake"
US President Bill Clinton
"We know the people are the judges and if they say no, it's no. What are we going to do? We go back to the opposition," he said. "The people did not vote for us because the media spoke badly of us throughout the campaign."
With 85% of votes counted, conservative businessman and landowner Oscar Berger led with 35% support.
A former Guatemala City mayor backed by the country's wealthy elite and the main newspapers, Berger fell short of an outright majority.
He now faces a runoff on 28 December against leftist politician Alvaro Colom, who won about 26% of the vote.
Rios Montt, who ruled the impoverished Central American nation with an iron fist in the early 1980s, trailed with 17%. His share was expected to rise only slightly as returns came in from Guatemala's most remote rural areas.
The FRG also lost its control of Congress. Rios Montt's 1982-1983 dictatorship was the bloodiest period of Guatemala's 36-year civil war.
Survivors and rights groups accuse him of ordering massacres of civilians in Maya Indian villages as part of a "scorched-earth" campaign against leftist rebels.
In March 1999, campaigners were staggered when US President Bill Clinton apologised for America's support for brutal right-wing governments in Guatemala during the civil war in which 200,000 people died.
Making admissions that the campaigners never thought they would hear, Clinton announced: "For the United States, it is important I state clearly that support for military forces and intelligence units which engaged in violence and widespread repression was wrong and the United States must not repeat that mistake."
No American president had ever before so directly admitted the US role in the atrocities.
A forensic anthropologist checks
a mass grave in August 2003
At the time, newly declassified intelligence documents added graphic details of the massacres, kidnapping and torture committed by Guatemalan security forces who were trained and equipped by the CIA and US forces.
Now campaigners say they are building a genocide case against those allegedly responsible, including Rios Montt, who is the FRG's secretary-general and leads it in Congress.
He could face trial once his parliamentary immunity ends at the end of his legislative term in January.
Analysts said Guatemalan voters rejected Rios Montt because of his civil war legacy and because the outgoing FRG government of President Alfonso Portillo had been plagued with corruption allegations and a rise in organised crime.
Portillo was barred from seeking a second four-year term.
Although Berger came in first on Sunday, he is linked to a traditional elite many poor Guatemalans despise, and some analysts say Colom could pull ahead in the run-off by winning smaller parties' support.
Berger has accused Colom of seeking an alliance with Rios Montt's FRG, but Colom said on Monday he had no plans to meet with Rios Montt. "We're not interested in that," he said.