"This is not an end," he said. "Tonight ends another chapter in Wisconsin history, but there's more to come."
A local woman was not amused by Barrett's concession speech, with video from CNN affiliate WISN showing her slapping the mayor after the speech.
The woman asked Barrett if she could slap him for conceding while voting was still under way, the affiliate reported. Barrett said he'd rather she hug him, but when he leaned down, the woman slapped him instead, according to the affiliate.
The race has been marked by high tensions.
During a bitter fight over the law last year, Democratic legislators left the capital to prevent a quorum, and tens of thousands of protesters converged on the State Capitol building in what became an occupation.
After the law was signed, Democrats immediately began a recall effort that led to Tuesday's vote.
Walker defended his budget actions as necessary for the fiscal health of his state and described his campaign as one of a strong leader who is making the necessary "tough decisions."
The campaign was fierce, with campaigners complaining of keyed cars, verbal harassment and a general lack of tolerance for differing opinions.
"We have an example of Hatfields and McCoys going on in this state like we have never seen," said Brian Nemoir, a Milwaukee-based Republican strategist. "People are hyper-engaged, as much in support for their own candidate as in disgust for the opponent."
A litany of Republican stars campaigned for Walker, including fellow Govs. Chris Christie of New Jersey, Nikki Haley of South Carolina, Bobby Jindal of Louisiana and Bob McDonnell of Virginia, as well as U.S. Sen. Marco Rubio from Florida.
Barrett, meanwhile, got his own high-powered support from former President Bill Clinton, as well as Democratic National Committee Chairwoman Debbie Wasserman Schultz and Maryland Gov. Martin O'Malley.
Obama never came to Wisconsin to campaign for Barrett, which Republicans surmised was because the president thought Barrett would lose.
On Sunday, Barrett said on CNN's "State of the Union" that his campaign never asked Obama to appear on his behalf, adding that "we understand he's got a lot going on."
White House press secretary Jay Carney acknowledged the uniqueness of the contest while stressing there's no doubt where the president stands.
"The president's made clear all along his opposition to those who would take away workers' rights -- to actions that would take away or diminish workers' rights," he said. "And he's also made clear his support for Tom Barrett."