Council leader Sir Albert Bore (left) and Lib Dem Leader Paul Tilsley were at the Birmingham City Council count
Labour has kept hold of three of its councils in the West Midlands.
In Birmingham, the party held 21 seats and gained one, to achieve the 61 seats it needed to retain overall control.
The Conservatives retained Solihull, Labour held both Dudley and Sandwell councils but failed to win an overall majority in Walsall by one seat.
Deputy leader of the Labour group Sean Coughlan said the party would "hold talks with councillors who had the same ethics" to form a coalition.
Mr Coughlan said: "I am disappointed to not have overall control but I have to be more pleased than the other major parties.
"On paper it will say we don't have overall control but we have the majority of seats. We'll be looking to take the administration over and if people have the same ethics and views as us, then they can come and talk to us."
In Walsall, Labour holds 30 seats, the Conservatives have 21, the Liberal Democrats have three, UKIP have three and three are held by Independents.
'Not a protest'
In Birmingham, Labour has 77 seats, the Conservatives have 32, with the Lib Dems holding 12.
Council leader Sir Albert Bore said: "I thought we'd make two or three gains but with what's happening across the West Midlands and the country with the UKIP gains, Labour has done well here in Birmingham.
"I know there is a feeling that the mainstream parties do not represent the mood of the country and that's something we need to tackle."
Solihull has got the West Midlands region's first ever Green Party opposition, the party said.
The Conservatives have 29 seats, the Green Party has 10, after gaining three, and the Lib Dems are next with eight.
UKIP took the seat of the leader of the Labour opposition group, David Jamieson.
On average, the Greens have scored 10% of the vote in the wards they have contested.
In Sandwell, Labour took 23 out of 24 seats that were up for election to hold its majority on the council.
Deputy leader of the Labour group on Walsall council, Sean Coughlan, said it would hold talks to form a coalition
Philip Garrett became the first UKIP councillor to be elected to the council after he won Princes End from Labour with more than 40% of the vote.
He said his election was "progress, not a protest."
"This ward is where I live, people know me as an individual and I had a good response while canvassing," he said.
"It's not just people voting on immigration and Europe, it's about local issues as well."
In Dudley, Roger Scott Dow was one of three UKIP councillors who won seats from the Conservatives and Liberal Democrats.
He described their gains as "a major result".
"We want to get out of the race at the bottom and compete with the bigger parties on the council," he said.