The victory marks the first time a Democrat has won a US Senate seat in Texas since 1988. It is a significant breakthrough for Democrats in a state that Republicans have controlled for generations.
Talarico, a former schoolteacher and Texas state legislator, overcame Paxton, a prominent conservative politician who enjoyed Trump's backing.
The result was projected by major US news networks after Tuesday's November 3 election. It also came amid a wider Democratic breakthrough in Texas, where Republican Governor Greg Abbott lost his re-election bid to Democrat Gina Hinojosa.
A victory built around the cost of living
Talarico's campaign focused heavily on the financial pressures facing ordinary Americans, including rising household expenses and concerns about the direction of the country's economy.
He sought to appeal to voters frustrated with the cost of living under Republican leadership, while presenting himself as an alternative to the political establishment.
His victory was particularly striking because Texas has long been a Republican stronghold. The state has regularly supported Republican presidential and statewide candidates, making a Democratic Senate win a difficult prospect for years.
Speaking to cheering supporters at his election watch party in Austin, Talarico celebrated the result.
"We just took back Texas," he declared.
He also challenged the influence of wealthy donors in American politics, saying: "We just proved that all the money in the world is no match for the people of Texas."
His remarks were a reference to the enormous financial backing Paxton received during the campaign.
From classroom to the national political stage
At 37, Talarico has built his political career around education, economic fairness and his Christian faith.
Before entering politics, he taught sixth-grade English at a public school in San Antonio. He was first elected to the Texas House of Representatives in 2018 and became known for his work on education and public policy.
His background as a teacher became a central part of his campaign. He often spoke about the challenges facing low-income families and the need for stronger public schools.
Talarico also drew attention for using religious arguments to challenge Republican positions on education, social issues and the relationship between religion and government.
His campaign gained wider recognition through social media appearances and interviews, including an appearance on Joe Rogan's podcast.
Paxton's political troubles and Trump's backing
Paxton entered the race with a stronger national profile and the backing of Trump, who made campaign appearances in Texas to support Republican candidates.
However, his political career had been marked by controversy. In 2023, the Texas House impeached him over allegations involving corruption and abuse of office. The state Senate later acquitted him, allowing him to remain attorney general.
Despite Trump's endorsement and substantial financial support from Republican-aligned groups, Paxton could not overcome Talarico's challenge.
Billionaire Elon Musk was among the most significant financial backers of the Republican effort. Campaign finance disclosures showed that $158 million from Musk was channelled through the Senate Leadership Fund to Texas PAC, which supported Paxton.
The spending became a central issue in Talarico's campaign, allowing him to portray the contest as a struggle between ordinary voters and wealthy political interests.
A wider setback for Republicans
Talarico's victory was part of a significant Democratic breakthrough in Texas.
Democrat Gina Hinojosa defeated incumbent Governor Greg Abbott, ending his bid for another term and becoming the state's first female Latina governor.
Her victory also marked the return of a Democrat to the Texas governor's office for the first time since Ann Richards left office in 1995.
The two results represent a major political setback for Republicans in a state that has been central to their electoral success.
The outcome raises fresh questions about the party's ability to maintain support among Hispanic voters, younger voters and families concerned about the economy and public services.
Immigration enforcement and the cost of living were among the issues that featured prominently in the election campaign.
The Senate victory could also strengthen Democrats' efforts to reshape the balance of power in Washington. However, the wider implications will depend on the final results across other competitive Senate and House races.
For Texas Democrats, Talarico's win represents an opportunity to rebuild their influence in a state where Republican dominance had long appeared difficult to challenge.
For Republicans, the defeat of Paxton and Abbott presents a serious warning ahead of future national elections.
