The 38-year-old Renzi, who just a year ago was a virtual unknown in Italian politics, trounced rivals Gianni Cuperlo, a party apparatchik, and Giuseppe "Pippo" Civati with around 68 per cent of the vote yesterday.
He was given an ovation from supporters in Florence, where he welcomed the strong turn-out of around 2.5 million voters, saying Italians "have shown that they are worth more than their leadership class".
The election of Renzi, who has said he takes inspiration from Tony Blair and Barack Obama, marks a transformation for the Democratic Party given his youth and the fact that he did not rise through the ranks of what was once Europe's largest communist party.
"We are changing the players but we are not going over to the other side of the pitch," he said.
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The youthful Renzi has also long campaigned against the middle-aged leadership of his own party and pushed for a more centrist programme, although leftist critics accuse him of being thin on concrete proposals.
Organisers had expected turnout to be lower than for the PD's primary in 2009 when Pierluigi Bersani was elected leader, given Italians' growing disenchantment with politics.
Little known until he challenged Bersani in last year's primary, Renzi has been riding high in the popularity sweepstakes even on the right.
He has pushed for more cuts in spending on Italy's unwieldy bureaucracy - amid widespread anger over high salaries for public officials even during a painful recession - as well as a greater focus on education.
His supporters say that if Renzi had won against Bersani for the party leadership in 2012, the PD would have won handsomely in the February general elections.
Letta also praised the strong turnout, saying it meant the Democratic Party was a "bastion against rising populism".
Yesterday's balloting was open to non-members of the PD and to overseas voters in a bid to boost turnout, and the voting age was lowered to 16.