The event's organizer, the Academy of Motion Picture Arts and Sciences, said it was the first time in the awards' 79-year history that the leading nominee failed to earn a best picture nomination.

"Babel," a globe-spanning exploration of clashing cultures and tragic coincidences, secured seven nominations, followed by Spanish-language adult fairy tale "Pan's Labyrinth" and the British royals drama "The Queen" with six each.

"Babel," "The Queen" and "The Departed" will compete for best picture alongside Clint Eastwood's Japanese-language World War Two saga "Letters from Iwo Jima" and the low-budget comedy hit "Little Miss Sunshine."

The Academy Awards will be held on February 25 in Hollywood.

Scorsese, Eastwood, and "Babel" director Alejandro Gonzalez Inarritu of Mexico, will face off for best director with British filmmakers Stephen Frears for "The Queen" and Paul Greengrass for the September 11 docudrama "United 93." Greengrass and Inarritu are first-time nominees.

Scorsese, 64, has been nominated six times for directing but has never won. He was considered the frontrunner two years ago with "The Aviator," but lost out to Eastwood and his dark-horse contender "Million Dollar Baby."

"Departed" producer Graham King told Reuters he would like Scorsese to end his losing streak but the director was "completely driven by film and the art of filmmaking" rather than by awards.

The film, Scorsese's follow-up to "The Aviator," was initially envisaged as a bloody thriller with no Oscar pretensions. But rave reviews and the best ticket sales of Scorsese's career made it an awards frontrunner. Scorsese won the Golden Globe for the film last week.

But movie pundit Tom O'Neil said Eastwood and his low-profile "Iwo Jima" -- with U.S. ticket sales of just $2.4 million -- have "once again ambushed the Oscar race when Martin Scorsese was out front," and was now the one to beat.

"Shocking thumbs-down"

Most Oscar pundits had expected "Dreamgirls" to be among the main contenders, but its omission from the top two races was "a shocking thumbs-down," said O'Neil, a columnist for the Los Angeles Times Web site theenvelope.com.

The film's highest-profile mentions were in the supporting acting races, where veteran comic Eddie Murphy and newcomer Jennifer Hudson, a former contestant on television's "American Idol" talent show, received their first nominations.

Rolling Stone magazine critic Peter Travers said the best picture race was now a toss-up. If Oscar voters find the Scorsese and Eastwood films too violent, "The Queen" too British and "Babel" too multilingual, "Little Miss Sunshine" could win. The low-budget comedy was recently named best picture by the Producers Guild of America, a group whose choices are often echoed by the Oscars.