Anne Marie Waters, the founder of Sharia Watch pressure group, was approved by UKIP's national executive to stand for its leadership along with 10 other people who will be put to a vote of members next month.
Waters believes her anti-Islam message, including a proposed ban on the burqa, the closure of all sharia councils and a temporary freeze on all immigration, will strike a chord with many voters.
UKIP said in a statement that the executive voted by a majority to allow all 11 to go forward.
Whether Waters wins or not, her nomination is expected to cause deep divisions within the anti-immigrant party.
Former leader Nigel Farage has warned that UKIP will be "finished" if it becomes an anti-Islam party.
Voting papers will be sent to party members over the next few weeks and the new leader will be announced at the party's annual conference in Torquay on September 29 and 30.