Australia's first woman prime minister used her first question time as leader in Parliament to pay tribute to her predecessor.
On a sensational day in Australian political history, Prime Minister Kevin Rudd - riding high in the polls only months ago - lost his position to his deputy Julia Gillard at a Labor Party caucus.
Ms Gillard praised Mr Rudd for having the courage to be in the chamber on the day he lost the leadership.
"He certainly has the gratitude and respect of the Labor Party," she said, "and I believe that every member of this place would be full of admiration for the remarkable and dignified way in which he has conducted himself today."
Struggled to hold back tears
Earlier, Mr Rudd had struggled to hold back tears as he listed the achievements he was proud of in his two and a half years as Prime Minister - such as providing extra social housing, building regional centres for cancer treatment and the apology to the "stolen generations" of Aboriginal people.
Mr Rudd, the first Labor prime minister to be dumped from office before completing a first term, says he will continue to serve the government in whatever way he can and will contest his seat at the next election.
The leadership challenge came to a head on Wednesday night, when the embatted Mr Rudd had hours of closed-door meetings with Ms Gillard and senior ministers.
Opinion poll support for his government had plummeted since April because of perceived policy bungles, such as his shelving of the emissions trading scheme and his handling of a controversial mining tax.
The ABC reports Ms Gillard has the backing of powerful unions like the Australian Workers' Union and the Health Services Union, and is supported not only by the party's right faction but key groups from the left.
No ballot required for either position
Despite having vowed to fight for the leadership, Mr Rudd stood down at the start of the 9am caucus meeting, so no ballot was required. Treasurer Wayne Swan was elected unopposed as the new deputy leader.
"I am truly honoured to lead this country, which I love," Ms Gillard told a packed news conference at noon in Canberra.
She said she plans to seek consensus on the mining tax and "reprosecute the case for a carbon price at home and abroad" as global economic conditions improve.
Ms Gillard, a 48-year-old lawyer who emigrated to Australia from Wales with her parents as a child, was then sworn in by Governor-General Quentin Bryce as Australia's 27th prime minister.
Key first to call
New Zealand Prime Minister John Key says he was the first leader to call Ms Gillard and congratulate her. Her advancement shows how rapidly the situation can change in politics, he says.
Mr Key also says he had a constructive relationship with Mr Rudd - whose scheduled official visit to New Zealand next week has now been cancelled.
Opposition Leader Phil Goff says Mr Rudd's fall shows that a prime minister can be riding high in the polls one day and gone the next.
