Senator Ted Cruz beat billionaire Donald Trump in Iowa's presidential nominating contest on Monday, dealing a big upset to the national front-runner in the race to be the Republican Party's White House nominee in 2016, Reuters reported.

Cruz, a conservative lawmaker from Texas, won with 28 per cent of the vote compared to 24 per cent for businessman Trump, Reuters said citing a MSNBC report.

Marco Rubio, a U.S. senator from Florida, came in third place with 23 percent, making him easily the leader among establishment candidates.

Meanwhile, Hillary Clinton led Bernie Sanders with a wafer-thin margin in the Democratic caucuses. With 85 percent of votes counted, Clinton had 50 percent, followed closely by Sanders with 49 percent.