Julia Gillard is to step down as Australia's first female prime minister after losing a leadership fight with Kevin Rudd.
Mr Rudd faces becoming the country's new leader with months until a general election after he won a Labor Party ballot by 57 votes to 45.
The defeated leader made no comment to reporters as she left the voting chamber flanked by supporters, but in a statement later she congratulated Mr Rudd and confirmed an earlier pledge to quit politics after the elections if she lost the ballot.
Opposition leader Tony Abbott She said it had been a "humbling" privilege to be appointed prime minister, adding: "I thank the Australian Labor Party for that privilege and I thank the Australian people for their support."
Welsh-born Ms Gillard, who ousted former diplomat Mr Rudd as leader in 2010 in a similar showdown, called the vote earlier amid reports that her bitter rival's supporters were gearing up for a fresh challenge.
Opinion polls had shown that the party could face huge losses in the September elections but that Mr Rudd would be the more popular leader.
Mr Rudd must now demonstrate that he can command a majority of the House of Representatives before the governor-general makes him prime minister.
If he cannot, opposition leader Tony Abbott could be asked to form a government, or the elections could be moved from September to August.
It was the latest in a series of power struggles between the pair over the past three years.
In March, Ms Gillard managed to retain the leadership of the party after she was urged to hold a ballot and Mr Rudd admitted he did not have enough support to defeat her.
During a similar battle in 2012, a video emerged of the Mandarin-speaking former diplomat Mr Rudd slamming his fist in an expletive-ridden tirade about a Chinese interpreter.
Ms Gillard's office was forced to deny leaking the footage.
As Ms Gillard called the latest ballot with just hours of notice, she appeared frustrated over the petition for a vote that was circulating within the party.
She said: "Call me old-fashioned, but the way in which these things are normally done is a challenger approaches the leader of the Labor Party and asks them to call a ballot for the leadership, who shake hands and then a ballot is held.
"That hasn't happened but in these circumstances I do think it is in the best interests of the nation and in the best interests of the Labor Party for this matter to be resolved ... "
Mr Rudd, who first swept to power in 2007, had said Labor was facing a "catastrophic defeat" at the next election unless there was "change".
The 55-year-old has promised tighter control of public spending, a speedier return to surplus budgets, and stronger economic growth.
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