CNN projected Bullock, the state's attorney general, had edged Hill, a former congressman, 49 percent to 47 percent with 87 percent of the vote counted. Libertarian Ron Vandevender polled in the low single digits.
Gov. Brian Schweitzer, a Democrat, couldn't run again because of term limits.
Bullock was greeted by supporters chanting his name when he appeared at the Great Northern Hotel in Helena after he was declared the winner, MTPR News reported.
"One of the best men that I've ever met and have gotten the chance to know real well over the last eight months, Montana's next governor, Steve Bullock," Lt. Gov.-elect. John Walsh said by way of introducing Bullock.
"It's been a long process but being elected as your next governor is an incredible, incredible honor," Bullock said.
GOP presidential nominee Mitt Romney won Montana's three electoral votes in Tuesday's elections, results showed. Romney won 55 percent of the vote to 42 percent for President Barack Obama with 87 percent of precincts counted, CNN said.
In the U.S. Senate race, Democrat Jon Tester won about 49 percent of the vote to about 45 percent for Republican Denny Rehberg and about 6 percent for independent Dan Cox, the Billings Gazette reported. MSNBC late Wednesday projected Tester would retain his seat.
In the U.S. House race, Republican Steve Daines had about 53 percent of the vote to about 43 percent for Democrat Kim Gillan and about 4 percent for Libertarian David Kaiser.
The Gazette said same-day voter registration and slow voting in some counties delayed the vote count.