Nova Scotia voters refused to give the Progressive Conservatives a fourth straight mandate in Tuesday's provincial election.
MacDonald's Tory minority government was toppled by Darrell Dexter's New Democratic Party, which claimed 31 seats in the 52-seat legislature, up from 20 in the last provincial election.
The Tories were reduced to third-party status and 10 seats. Before dissolution, they held 21 districts. The Liberals gained two seats to end up with 11.
MacDonald won his Cape Breton district of Inverness with 56 per cent of the vote, but his party suffered losses in districts across the province.
MacDonald told his supporters in Mabou that he called Dexter and pledged his support for a smooth transition to power. He also told the Tory faithful that he accepted the decision of Nova Scotia voters.
"Nova Scotians have decided to go in a different direction," he said. "They have said it is time for a change … It is a decision I respect."
MacDonald would not say whether he was going to resign as PC leader. However, he said he would meet with the party's president and caucus colleagues to discuss his future in the next few days.
"It's going to be time to turn the next chapter for the people of the province," MacDonald told reporters when asked about his fate as party leader.
MacDonald was first elected to represent the Inverness district in the legislative assembly in 1999, and was re-elected in 2003 and 2006. He held several portfolios, including health promotion, immigration, and tourism, before becoming leader of the PC party only months before the June 2006 election.
Tories triggered early election
MacDonald forced the election after introducing a finance bill, which pre-empted the provincial budget, that both the NDP and Liberal opposition parties refused to support.
MacDonald hit the hustings, blaming both opposition parties for blocking a budget that would have seen hundreds of millions of dollars spent on new schools, roads and other infrastructure projects.
Once the election writ was dropped, MacDonald said he believed he was in a two-way race with Dexter's NDP.
During the campaign, the Tories criticized the NDP's platform for being "intentionally misleading" and for not being upfront about its true costs.
The Tory focus on the NDP heightened in the last days of the election campaign.
The Tories began running ads on seven radio stations last week alleging the NDP accepted illegal campaign contributions from union bosses.
The NDP responded by sending letters to the stations, demanding they stop airing what they termed "defamatory" ads. But, the ads continued to run during the weekend.
Tuesday's election marks the fifth time that Nova Scotians have gone to the polls since 1998. Nova Scotia has had a minority Tory government since August 2003, when former premier John Hamm lost his majority.
At dissolution, the Tories had 21 seats in the 52-seat legislature, while the NDP had 20 and the Liberals nine. There was one Independent and one vacant seat.