Rishi Sunak will return to Downing Street as Britain’s next prime minister after his last remaining rival Penny Mordaunt withdrew from the race.
Mr Sunak, 42, was elected Conservative Party leader after winning the backing of a majority of Tory MPs.
He was the only candidate left standing after Ms Mordaunt pulled out moments before the deadline for nominations.
Former prime minister Boris Johnson called off his comeback bid on Sunday.
Markets reacted positively as Mr Sunak took on the challenge of steering Britain through stormy economic waters. The blue-chip FTSE 100 rose 0.6 per cent.
It is a remarkable turnaround for Mr Sunak, who in July resigned from Mr Johnson's Cabinet sparking a mutiny among his colleagues which swiftly brought down the prime minister. Members chose Liz Truss over Mr Sunak in the summer contest to succeed Mr Johnson, but her leadership imploded in 45 days after a botched mini-budget.
Tory MPs were urged to unite behind Mr Sunak after weeks of party warfare that dragged the Conservatives down to their worst poll ratings since the 1990s.
MPs hugged and applauded him as he arrived at party headquarters as the newly crowned leader.
Mr Sunak takes on an array of challenges including high inflation, rising energy and mortgage costs, nervous financial markets, the war in Ukraine and the continuing fallout from Brexit.
"Rishi will provide the calm, competent, pragmatic leadership our country needs at this deeply challenging time," former prime minister Theresa May.
Alicia Kearns, the newly elected chairwoman of Parliament's foreign affairs committee, said: “It’s a return to grown-ups at the table, a return to fiscal responsibility and return to compassionate Conservativism, which are all good things."
Mr Sunak will be appointed prime minister by King Charles III after Liz Truss formally tenders her resignation.
The king was returning to London from his Sandringham estate on Monday, but it was not yet clear when the ceremonial handover would take place.
Born in Britain to a family of Indian heritage, Mr Sunak will be Britain’s first Hindu prime minister and the youngest for more than 200 years.
"This decision is a historic one and shows, once again, the diversity and talent of our party. Rishi has my full support," Ms Mordaunt said as she conceded defeat. Ms Truss also offered her full support.
Sunder Katwala, the head of race relations think tank British Future, said Mr Sunak's appointment would not have been possible "even a decade or two ago".
"This will be a source of pride to many British Asians — including many who do not share Rishi Sunak’s Conservative politics," he said.
Party rulemaker Graham Brady said only one valid nomination, for Mr Sunak, was received before the 2pm deadline.
He did not reveal whether Ms Mordaunt would have had the 100 nominations from MPs needed to force a ballot. But her allies said she had about 90, while Mr Sunak had almost 200.
Sir Christopher Walker, whose incensed appearance after a House of Commons voting debacle last week summed up the Tory anger of the past month, said there was newfound unity on display as Mr Sunak gave a private address to MPs.
“If last Wednesday night was a low point, then that was a high point,” he said.
Senior backbench MP Crispin Blunt told The National that Mr Sunak gave “an awesome performance” that was “full of energy”.
Ms Mordaunt's withdrawal means the leadership question will not be put to the grass roots Tory membership.
The race to replace Ms Truss was compressed into a matter of days so that the new prime minister could quickly take charge of Britain's economic crisis.
Mr Sunak, a former chancellor of the exchequer, had touted his experience to MPs in guiding the economy through the coronavirus pandemic.
Supporters said his economic plans were vindicated after he warned against the tax cuts that backfired on Ms Truss, while critics described the wealthy Mr Sunak as out of touch.
In a second campaign that took place largely behind the scenes, he promised to show integrity and professionalism after the chaos of recent months.
Mr Johnson was forced out in July after a series of scandals wore down the patience of voters, MPs and ultimately his own ministers, including Mr Sunak.
The former prime minister claimed on Sunday he had the 100 supporters needed to advance, but conceded he would struggle to govern a party divided over his legacy.
The opposition Labour Party is calling for a general election after a second change of leadership since the Tories won a majority in 2019.
"Nobody voted for this," said Labour's deputy leader Angela Rayner.
