Victoria's new premier was sworn in on Wednesday night. Dr Denis Napthine succeeds Ted Baillieu who resigned earlier in the night.
State Governor Alex Chernov appointed the Liberal Member for South West Coast as premier during a brief ceremony at Government House about 10.40pm (AEDT) on Wednesday.
AAP reports he earlier accepted the resignation letter of Mr Baillieu, who stepped down after Frankston MP Geoff Shaw quit the Liberal Party.
Mr Shaw's resignation left the Coalition with 44 seats in the lower house, which has 88 seats. Labor has 43.
Prime Minister Julia Gillard said she wished Mr Baillieu well and pledged to work with his replacement.
"This decision must have been a very difficult one for Mr Baillieu and for his family," Ms Gillard said in a statement.
"I wish Mr Baillieu all the best for the future."
Federal Opposition Leader Tony Abbott earlier praised Mr Baillieu as a man of integrity and honour congratulated Dr Napthine, 61, on his election as leader.
"I look forward to working closely with him," he said.
Earlier, Mr Baillieu confirmed that he had stepped down.
"I love this state, I love this party and I love this role that I have had the honour to enjoy over the last two-and-a-bit years," he said.
"But it is apparent to me that a change of leadership is in the best interests of the Government."
The ABC reports Mr Baillieu will remain in parliament.
AAP reports he did not explain his reasons for quitting on Wednesday night, but said it was in the government's best interests.
Dr Napthine maintained it was Mr Baillieu's decision.
"Ted made a decision that he would step down as leader of the party. He felt he didn't have the support of the party," he told ABC Radio on Thursday.
Dr Napthine said he was not sure that Mr Shaw's resignation was the catalyst for Mr Baillieu's departure.
