The former prime minister's Pakistan Tehreek-e-Insaf (PTI) party took enough seats in Sunday’s by-elections to the Punjab provincial assembly to snatch back control from the ruling Pakistan Muslim League (PML-N) and rock the central government.
The bitterly contested local polls had been seen as a key test for Mr Khan's popularity and his claim that the no-confidence vote that saw him removed from power in April was in fact a foreign conspiracy.
The 69-year-old has spent the past three months gathering large rallies in which he has accused the US of conspiring against him and made unusually outspoken attacks on the powerful Pakistan military that once backed him.
The new PML-N government led by Shehbaz Sharif has meanwhile struggled with galloping inflation and had to make painful economic decisions to remove subsidies to win an international bailout.
The contest for 20 Punjab assembly seats was also seen as a bellwether for national elections that must be held by October next year. Mr Khan has said elections should be held sooner.
“The only way forward from here is to hold free and transparent elections,” Mr Khan tweeted early on Monday, as the votes were tallied.
“Any other way will only lead to increased political uncertainty and further economic chaos.”
He said his party had prevailed over biased election authorities, police harassment and “the entire state machinery”.
An unofficial preliminary tally showed the PTI had won 15 of the 20 seats, compared with only four for the PML-N. An independent candidate was on course to win the remaining seat.
If confirmed, the result would raise the PTI’s strength in the 371-seat Punjab assembly to 178 which, together with 10 seats from its ally, the Pakistan Muslim League (Qaid e Azam), would give it a majority.
Washington denies any involvement in Mr Khan's downfall in April, but his allegations that he was ousted for defying the US over foreign policy have found widespread sympathy.
“With this historic win you have told the world we are a self-respecting nation,” the PTI's Twitter account told supporters.
“Now whatever the Pakistani people decide, will happen. No foreign power has the right to decide our fate.”
Michael Kugelman, deputy director of the Asia programme at the Washington-based Wilson Centre, said Mr Khan's victory showed he could translate street power into electoral power.
“If the new beleaguered government was looking for a boost to its mandate, it clearly didn’t get it,” he said.
The PML-N leadership accepted defeat in Punjab.
“One should bow before the decision of the people,” Maryam Nawaz Sharif, niece of the prime minister, said. “In politics there are always wins and losses.”