We present the final results of the CP-PACS calculation of the light hadron spectrum and quark masses with two flavors of dynamical quarks. Simulations are made with a renormalization-group improved gauge action and a mean-field improved clover quark action for sea quark masses corresponding to m(PS)/m(V) approximate to 0.8-0.6 and the lattice spacing a 0.22-0.11 fm. For the meson spectrum in the continuum limit a clearly improved agreement with experiment is observed compared to the quenched case, demonstrating the importance of sea quark effects. For light quark masses we obtain m(ud)((MS) over bar)(2GeV) = 3.44(-0.22)(+0.14) MeV and m(s)((MS) over bar) (2GeV) = 88(-6)(+4) MeV (K-input) and m(s)((MS) over bar) (2GeV) = 90(-11)(+5) MeV (phi -input), which are reduced by about 25% compared to the values in quenched QCD.