Blair's overwhelming victory, in a vote by Labour lawmakers, party members and trade unions, came just 24 hours after Prime Minister John Major revamped his cabinet in an effort to take the gloss off the 41-year-old barrister's expected success.
Blair's victory effectively launches the campaign for the next election, due by mid-1997, when the Conservatives will be bidding for their fifth successive victory.
Right-winger Blair achieved 57 percent of the vote, pushing left-winger John Prescott (24.1 percent) into second place and Margaret Beckett (18.9 percent) into third.
Beckett had been Labour's acting leader since John Smith died of a heart attack in May.
Prescott was elected deputy leader in a separate vote, giving Labour a left-right axis at the top that party officials believe will satisfy traditional Socialists and attract converts from the Conservatives and minority Liberal Democrats.
Conservative ministers admit they are concerned that Blair's good looks and common-sense views on what is wrong with British society will attract vital middle-class voters, angry at policy U-turns, tax rises and scandals involving government lawmakers.
Blair said the Conservatives should move aside after 15 years in power. No cabinet reshuffle would be extensive enough to increase their low popularity, he said.
"Let me say to them -- you have had your chance," Blair said in his victory address. "You have had 15 years to get it right. If you can't change this country for the better after 15 years, you never will. It is time for you to go."
Major sacked four cabinet ministers and brought in younger, more dynamic junior ministers in what senior officials said would be the last reshuffle before the next election.
Blair, who inherits Labour's 15 to 20 percentage point lead in opinion polls, earned his own high rating among Labour supporters for wresting the initiative on law and order, a traditional Conservative preserve, from the government.
His phrase "tough on crime and tough on the causes of crime" summed up how deprivation and unemployment could force young people off the straight and narrow. He attacked Conservative policies that have put 2.6 million people out of work.
Labour had touted the election, with more than 4.3 million eligible to vote, as the biggest exercise in party democracy in western European history.
The three leadership contenders avoided personal attacks and stayed within the policy parameters agreed by the party. "Look at how we have changed. There was a time when such an election would have been watched with trepidation by our friends and glee by our enemies; now it is an advertisement for Labour," Blair said.
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