Ms Badenoch has served as shadow business and trade secretary since the Conservative Party lost the general election in July and Rishi Sunak said he would stand down as leader, triggering the campaign.
Her campaign was called Renewal 2030 and has targeted the next election for the Tories to return to power.
Ms Badenoch has been criticised at times for her outspoken approach, with opponents jumping on comments she has made about subjects such as maternity pay, gender equality and net zero.
But she has long been popular among the party membership, and previously ran to be leader in 2022.
Please use Chrome browser for a more accessible video player
3:17
Badenoch crowned Tory leader
However, James Cleverly revealed the day before the results that he would be returning to the backbenches.
Speaking after her win, Ms Badenoch thanked the other candidates, saying the party had come through the campaign “more united”.
The new leader went on to say the party’s first duty as opposition was to hold Labour to account – and also to prepare for government by the time of the next election.
She then went on to criticise previous Conservative administrations.
Ms Badenoch said: “Our party is critical to the success of our country.
“But to be heard, we have to be honest, honest about the fact that we made mistakes, honest about the fact that we let standards slip.
“The time has come to tell the truth, to stand up for our principles, to plan for our future, to reset our politics and our thinking, and to give our party and our country the new start that they deserve.
“It is time to get down to business. It is time to renew.”
Please use Chrome browser for a more accessible video player
1:25
Badenoch: ‘We let standards slip’
Follow Sky News on WhatsApp
Keep up with all the latest news from the UK and around the world by following Sky News
In total, around 132,000 members of the Conservative Party were eligible to vote in the leadership election – a noticeable fall from the 172,000 in the contest in 2022 which Liz Truss won.
The turnout was also down – 72.8% in 2024 vs 82.2% in 2022 – with around 40,000 members not voting.
Prime Minister Sir Keir Starmer said: “Congratulations, Kemi Badenoch, on becoming the Conservative Party’s new leader.
“The first black leader of a Westminster party is a proud moment for our country.
“I look forward to working with you and your party in the interests of the British people.”
Ellie Reeves, who is chair of the Labour Party, delivered a more political attack: “It’s been a summer of yet more Conservative chaos and division.
“They could have spent the past four months listening to the public, taking responsibility for the mess they made and changing their party.
“Instead, Kemi Badenoch’s election as leader shows they’re incapable of change.
“Meanwhile, the Labour Government is getting on with fixing the foundations of our economy and cleaning up the mess the Tories left behind.”
Liberal Democrat leader Sir Ed Davey congratulated Ms Badenoch as well for her election – before adding that the Tories are still “too divided, out-of-touch and unable to accept Conservative failures over the past years”.
Richard Tice, the leader of the Conservative Party, did not congratulate her and instead attacked Ms Badenoch for her record – saying “she has failed the British public before and she will fail them again as leader of the Conservative Party”.