The former business secretary was declared the winner at an event in central London on Saturday, beating rival Robert Jerrick by 53,806 votes to 41,388.
She became the first black woman elected to lead a major British political party and the fourth woman to lead the Conservative Party after Margaret Thatcher, Theresa May and Liz Truss.
The North West Essex MP will replace Rishi Sunak as Leader of the Opposition and try to chart a path back to power for the Tories after their disastrous election defeat in July.
They face a significant challenge, with just 121 MPs after an election in which the party lost seats to Labour, the Lib Dems and the Reformers.
In a speech after her victory, Ms Badenoch admitted her party’s task was “tough but simple”, saying the Tories needed to hold the government to account and develop a “clear plan” to govern.
She added that the party must be “honest” about “the fact that we have made mistakes” and “the fact that we have let standards slip”.
She said: “The time has come to tell the truth, stand up for our principles, plan for our future, realign our politics and our thinking and give our party and our country the fresh start they deserve.
“Time to get down to business, time to renew.”
Both her predecessor Rishi Sunak and Prime Minister Sir Keir Starmer congratulated Ms Badenoch on her victory.
Mr Sunak urged Conservatives to rally behind their new leader, saying: “I know she will be a superb leader of our great party. She will renew our party, stand up for Conservative values and fight Labour.
Sir Keir said: “The first black party leader at Westminster is a proud moment for our country.
“I look forward to working with you and your party in the interests of the British people.
But Labor leader Ellie Reeves said the Conservative leadership campaign showed the party “has learned nothing since the British people decisively rejected them in July”.
She said: “They could have spent the last four months listening to the public, taking responsibility for the mess they made and switching parties.
“Instead the election of Kemi Badenoch as leader shows that they are incapable of change.”
A YouGov poll published ahead of the results found that four in 10 voters had an unfavorable view of Ms Badenoch, including 29% of Conservative voters, while Britons were more likely to think Labor leader Sir Keir Starmer would be a better prime minister.