Rishi Sunak and Liz Truss will face off over the next few weeks to become the UK’s next prime minister.
The former Chancellor and Foreign Secretary finished in the top two places after five rounds of Tory MPs, with Penny Mordaunt knocked out of the race after tough competition at Westminster.
Mr Sunak, the favorite throughout the parliamentary stage of the contest, secured 137 votes in the final ballot.
Ms Truss won 113 votes, pushing Ms Mordaunt narrowly to third place out of 105.
Mr Sunak and Ms Truss will now face a campaign to win votes from Tory members, with the result of the contest being announced on September 5.
The winner is expected to replace Boris Johnson as prime minister the next day.
Ms Mordaunt had been second in all previous ballots, but a late push from Ms Truss cost her a place on the ballot.
The Foreign Secretary secured 27 votes, Mr Sunak put in 19 while Ms Mordaunt was only able to win 13 more supporters.
Bookmakers have made Ms Truss the favorite to win the contest in the country, but Mr Sunak said he was best placed to beat Labour’s Sir Keir Starmer in the next election.
He said: “We need to restore confidence, rebuild the economy and reunite our country.
“I’m confident we can do it and we have a really positive message to send to all of our members now – most importantly, who is the best person to beat Keir Starmer and Labor in the next election?
“I believe I’m the only candidate who can do that.”
Ms Truss said: ‘I am delighted to be in the country now to advocate with the Conservative Party about my bold new economic plan which will cut taxes, grow our economy and unlock the potential of everyone in the UK.
“As Prime Minister, I would step out on the pitch from day one, unite the Party and govern in accordance with Conservative values.”
The two candidates are expected to face each other in a televised debate on Monday evening and participate in a series of roundups.
Previous debates have seen them clash fiercely and some Tories fear the damage that further public wrangling will do to the party.
Ms Mordaunt praised her two rivals and said: “I pay tribute to everyone who comes forward for such a demanding role.
“Politics is not easy.
“It can be a divisive and difficult place.
“Now we all need to work together to unify our party and focus on the job that needs to be done.”
In his final appearance for Prime Minister’s Questions, Boris Johnson offered advice to his successor and what appeared to be a swipe at his former chancellor.
The Prime Minister has not publicly backed any of the candidates, but some of his closest allies have backed Ms Truss.
Mr Sunak said further tax cuts could only be granted when inflation was brought under control and public finances allowed, but Ms Truss pledged to ‘start cutting taxes from day one’ .
Mr Johnson’s advice was: ‘Cut taxes and deregulate wherever you can and make it the best place to live and invest, which it is.’
He added the new Prime Minister should be prepared to ignore their Chancellor: ‘I love the Treasury but remember if we had always listened to the Treasury we wouldn’t have built the M25 or the Channel Tunnel’ .
Mr Sunak’s resignation helped spark the revolt against Mr Johnson, which eventually led to him agreeing he had to leave Number 10.
The Prime Minister said his successor should “focus on the road ahead, but never forget to check the rear view mirror”.