Henry Bolton won with 30 per cent of the vote, beating Anne Marie-Waters who came in second with 21.3 per cent of the vote at the party's annual conference in Torquay.
Bolton had been backed by former UK Independence Part (UKIP) chief Nigel Farage to become the fourth leader in a year after a series of controversial resignations by previously elected leaders.
"Brexit is our core task, however, it is not the end of the line," Bolton told the conference after his win.
"Today is not only a crucial day for our party, it is a critical day for our country," he said.
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Controversy around Waters' candidacy had prompted threats from some UKIP members that they would leave the party if she won.
Waters has been vocal about what she categorises as the "evil" religion of Islam and is the co-founder of the UK wing of the anti-Islam group Pegida.
The UKIP leadership race was triggered with the resignation of Paul Nuttal soon after disastrous general election results in June in which the UKIP failed to win a single seat in Parliament.