The outgoing Taoiseach, Enda Kenny, stepped down as party leader in May, a position he held since 2002.
Varadkar's sole opponent, Housing Minister Simon Coveney, whose roots in the party run deep, won the backing of nearly two-thirds of the party's regular members.
But in the system for electing Fine Gael's leader, their votes only made up 25% of the total. Varadkar was backed by a majority of the Fine Gael's local council members and, crucially, 51 of its 73 parliamentary colleagues, whose votes counted for 65% of the total.
Varadkar said he was "delighted and humbled" at the result.
Read: Who is Leo Varadkar?
Varadkar, the son of an Indian-born father and Irish mother, became a doctor before first entering Irish parliament at the age of 27.
In 2015, as Minister of Health, Varadkar came out on Irish national radio, joining a handful of other openly gay politicians in Ireland in support of the Marriage Equality Bill, which allows same sex couples to marry.
Varadkar might seem to be an unexpected pick for leader of Ireland -- a country that's still finding its secular European footing after years of church influence over the state. But Varadkar's policies signal a sharp move towards the right.
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