Mona Sahlin, 50, was elected in a vote seen as a formality as she was the sole candidate nominated for the leadership by an electoral committee.
The party’s 350 delegates unanimously chose Sahlin, shouting a resounding “yes” when her name was put to them.
She takes over from Göran Persson, the former prime minister who had led the party since 1996 and who was ousted by a centre-right coalition headed by Fredrik Reinfeldt in September’s legislative vote.
Sahlin’s election also sets the scene for her to become Sweden’s first woman prime minister if she leads the party to a comeback in the next legislative elections in 2010.
“I feel an enormous amount of pride to be the first woman leader of our party” in its 118-year history, a teary-eyed Sahlin told delegates.
A born-and-bred Social Democrat, she joined its youth wing in her early teens and rose through the ranks to become the party’s first woman secretary in 1992.
She has held several cabinet posts throughout her career, and has served as deputy prime minister.
Sahlin is however a controversial figure within the party and was not the first choice for the leadership, winning the nomination by default after several other heavyweights bowed out of the race.
Her career has been marked by both glorious periods where she has been the party’s darling, and stormy episodes, including the famous 1995 “Toblerone affair” when she was found to have charged private purchases, including a chocolate bar, to her government credit card.
The scandal swelled to reveal that her personal finances were in disarray, and she ended up taking a three-year time-out from politics.
She continues to pay the price for her mistakes. A poll published on Friday showed that only 56 percent of Social Democratic voters have “strong confidence” in her as party leader. That can be compared to the 91 percent of conservative Moderate voters who have strong confidence in their party leader, Prime Minister Fredrik Reinfeldt.
The Social Democrats’ goal is now clear: to regain control of the government in 2010. In the past 75 years, the party has spent only 10 years in opposition.
“We have three-and-a-half years to give our all to Social Democratic ideas, to fight right up until the election in 2010, and to change parts of the party organisation,” she said during her acceptance speech on Saturday.
She has already declared three priorities for her leadership: global warming, labour market issues, and the fight against social injustice.
But she has not yet revealed in which direction she will take the party, and is expected to take her time to listen to party members before announcing any major changes.