Tzipi Livni has lost her party's primary race and will be replaced by Shaul Mofaz as Kadima leader.
Mr Mofaz, a former army chief, won 62 per cent of the votes and will be in place to contest the Israeli general election in October 2013.
Ms Livni's defeat comes after she faced heavy criticism for her record as Opposition leader, despite Kadima's large proportion of Knesset seats.
Her Iranian-born successor, 63, served as Defence Minister during the second intifada and is chairman of the Knesset Foreign Affairs and Defence Committee.