Finance Minister Yoshihiko Noda has won the leadership race of the DPJ and will become Japan's 6th prime minister in 5 years.
Mr Noda secured victory in a run-off against Trade Minister Banri Kaieda, after a first-round vote in which no candidate won a clear majority.
Prime Minister Naoto Kan announced his resignation on Friday.
He has been criticised for his handling of the quake aftermath.
Mr Noda, 54, is expected to be confirmed by parliament as prime minister on Tuesday.
He secured 215 votes in the ballot against Mr Kaieda's 177 votes.
Large parts of Japan need to be rebuilt after March's earthquake and tsunami, and the crisis at the crippled Fukushima nuclear power plant still needs to be resolved.
Added to that, Mr Noda, a fiscal conservative, will need to address Japan's stagnant economy.
He has said in the past that he favours raising funds through increased taxation - including a doubling of Japan's sales tax, which currently stands at 5% - to cut debt and meet social security commitments.
Unlike Mr Kan, he wants Japan's halted nuclear reactors to be restarted and has not backed his call for a nuclear-free Japan.
"Let us sweat together for the sake of the people," he said after the vote. "This is my heartfelt wish."
Japan poured three times more "stimulus" into a smaller economy in the 1990's than we did and growth has still been sluggish. Currently, their debt is twice their GDP and they are now paying for that profligacy by having to drastically raise taxes.
Is this our future? If you want to find out, re-elect President Obama.