The 38-year-old leader became the first openly gay Cabinet minister in Ireland after coming out in 2015.
He beat his rival, housing minister Simon Coveney, with 60% of the votes, and will take over from former Fine Gael leader Enda Kenny in the coming weeks.
Ireland is on the cusp of electing its first gay premier after the ruling Fine Gael party revealed its new leader Leo Varadkar.
The octogenarian can not contain his excitement as his nephew, Leo Varakdar, a politician from the Fine Gael party and doctor by profession, is all set to be Ireland's new Prime Minister.
"If my election shows anything it's that prejudice has no hold in this Republic", he said.
Coveney won the votes of a majority of party members, but Varadkar was backed by most lawmakers and local representatives to give him victory under the centre-right party's electoral college system.
He will be replacing Enna Kenny, who served in the position for six years.
The victor of the contest will be announced when votes for the leadership of the Fine Gael party are counted in the Mansion House in Dublin. Prior to becoming a politician, Varadkar was a doctor; his partner, Matthew Barrett, is also a doctor.
In the United Kingdom, the Guardian newspaper reported the win with the headline "Leo Varadkar, gay son of Indian immigrant, to be next Irish PM". He made news in 2015 when he came out as gay, an announcement that was initially met with some shock by his father but who, he said later, was "very supportive".
But the grassroots members of Fine Gael only carry around a quarter of the final vote while the votes of TDs are roughly 400 times more valuable. "It's not something that defines me", he said.
"We are happy that he is a member of our family who is going to script history and become the world's youngest prime minister". It doesn't define me.