Although the vote only secured a seat in Hong Kong's 60-member legislative council, it was seen as the biggest test for the level of support for democracy in the country since Britain handed the territory back to China in 1997.
The pro-democracy camp was looking for a boost from Chan, who was the front-runner in public opinion polls, after a drubbing in district council elections last month at the hands of the biggest pro-Beijing party.
Chan made a name for herself as the first-Chinese, first-female head of the civil service under British rule, and she emerged from retirement a year ago to press for universal suffrage, saying she was disillusioned by the slow pace of reform.
|As security chief in 2003, Ip tried to force an|
anti-subversion law through legislature [AFP]
Ip, 57, enjoys the support of the city's powerful pro-establishment constituency, which is content to let Beijing decide when and how democracy should be expanded.
Ip is perhaps best known for trying to force an unpopular anti-subversion law through the city legislature in 2003 as its security chief.
That attempt is widely blamed for sparking a protest that drew half a million people into the streets, shocking leaders in Beijing.
Currently, Hong Kong's chief executive is picked by an 800-seat committee under the influence of the Communist leadership in Beijing.
Half of the legislature is popularly elected, the other picked by "functional constituencies".
The city's constitution states that universal suffrage is the ultimate aim of political reform, but it is vague on its timing and implimentation.
Some analysts say Beijing wants to delay the reform as long as possible.
Chan and Ip both say they favour the introduction of universal suffrage by the next chief executive election, which is in 2012, but they differ on important technicalities, including how candidates could be nominated.
Analysts say Chan's victory could give the democratic camp a boost in the run-up to a full Legco election next year.