Ben Gummer, who had been the town's MP since 2010, got 23,393 votes compared with 24,224 votes for Labour's Sandy Martin.
Mr Martin said he had seen "a good deal of enthusiasm" while out on the campaign trail.
He said Labour ran a "very good election campaign, conducted in a civilised way with a great degree of sense and a clear focus."
UKIP's Tony Gould came in third with 1,372 votes, pushing Liberal Democrat Adrian Hyyrylainen-Trett into fourth place with 1,187 votes.
Elsewhere in the county Conservative Matthew Hancock held his West Suffolk seat.
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Labour has snatched Ipswich from the Conservatives by fewer than 250 votes.