Rishi Sunak will be the first British Asian prime minister after his only surviving challenger dropped out of the Conservative leadership race.
Before the nomination deadline on Monday, nearly 200 Conservative MPs publicly backed the former chancellor.
Commons Leader Penny Mordaunt withdrew after failing to garner enough backing from MPs.
It means that Mr. Sunak will succeed Liz Truss as the youngest Prime Minister in more than 200 years.
Mr. Sunak, a 42-year-old Hindu, is set to take office in the coming days now that the outcome of the Tory leadership election is known.
Sir Graham Brady, the chairman of the 1922 committee of backbench Conservatives, announced the verdict to Mr. Sunak and Tory MPs.
Mr. Sunak informed them in his speech, which took place behind closed doors, that this would be a difficult period and ruled out an early general election, according to MP Simon Hoare.
Mr. Sunak will be appointed by the King to succeed Ms. Truss, who resigned just 45 days into her turbulent premiership last week.
Mr. Sunak’s election as Tory leader effectively concludes the former chancellor’s swift political return after losing the last leadership contest to Ms. Truss during the summer.
Ms. Truss, whose tax-cutting programme Mr. Sunak derided as “fairytale economics,” congratulated him and pledged her “unconditional support.”
Her replacement will assume office at a time of economic turmoil and fiscal strain, compounded by Ms. Truss’s mini-budget, which has been largely abandoned.
After a period of heavy political turbulence under Ms. Truss’s government, Conservative Party Chairman Jake Berry said it was time for the party to “unite foursquare behind Rishi.”
Ms Mordaunt withdrew from the latest competition just minutes before the results were released, acknowledging that “colleagues feel we need certainty today.”
“This decision is an historic one and shows, once again, the diversity and talent of our party,” Ms. Mordaunt wrote in a tweet. “Rishi has my full support.”
Ms. Mordaunt pushed the leadership battle to the line, but she was under pressure to rally around Mr. Sunak after former Prime Minister Boris Johnson dropped out on Sunday.
Mr. Johnson, who resigned as Prime Minister only seven weeks ago, said he had enough support to run but that now was “not the right time.”
According to sources, Mr. Sunak and Mr. Johnson met on Saturday as Tory MPs debated who to support in the second Tory leadership election in four months.
