Nicolas Sarkozy, the right-wing incumbent, is all but certain to run for re-election, but recent opinion polls show him on course to lose, as Francoise Hollande's victory will serve as a springboard for his challenge.
With most of an estimated 2.8 to three million votes counted, Hollande had an unassailable lead over Socialist leader Martine Aubry, who conceded.
"It's a great victory for democracy," Hollande said, hailing not only his own success, but his party's in organising France's first ever US-style open primary, which he hopes has given him a convincing mandate.
"I want to re-enchant the French dream," he said. "France needs a programme that will bring it back to itself. I want to be the candidate of respect and of dialogue, who brings a new definition to the presidency."
"Tonight, we rally behind our candidate," Aubry declared, welcoming her erstwhile opponent to Socialist Party headquarters to celebrate his victory.
Segolene Royal, who is both Hollande's former partner and the Socialist's defeated candidate in the 2007 election, said the win was both an "undeniable advance" and showed supporters' "very strong trust" in the victor.
Hollande had the backing of the four defeated first-round candidates and entered the run-off as favourite, but Aubry mounted a tough fight back, branding him a soft centrist without the steel to defeat Sarkozy.
Aubry, 61, the former labour minister who gave France its 35-hour working week, also attacked Hollande's lack of executive experience.
But 57-year-old Hollande turned the attacks to his advantage, accusing Aubry of undermining party unity and suggesting his lack of a track record would make it easier for him to run as a candidate of change.
"I understand the scale of the task ahead of me, it is heavy and serious. I need to match the expectations of the French citizens who can no longer bear the policies of Nicolas Sarkozy," he said.
Hollande promised to better regulate financial markets, fight unemployment and reduce the cost of health care and accommodation.
With most of the results in early Monday, Hollande was a comfortable winner securing over 56 percent of the votes cast.
Sarkozy's camp was wrong-footed by the primary. Some of his supporters grudgingly admitted it served as a good shop window for the Socialists, but the president himself dismissed it as alien to French political tradition.
The majority UMP mocked the left's policy debate, portraying it as a throw-back to the 1980s, but the televised confrontations drew large audiences.
Aubry succeeded Hollande as Socialist Party general secretary and has since let it be known that she found the organisation in a sorry state.
Hollande was the partner of fourth-placed challenger Royal for 30 years, raising four children with her. But he split from her secretly before her failed presidential run to move in with his girlfriend.
Despite the bad blood, the campaign only turned truly bitter in the closing straight, when Aubry attempted to close down Hollande's narrow but consistent lead by tacking to the left and branding him weak.
Historically, both she and Hollande come from the party centre ground.
In 1995, when France's last Socialist president Francois Mitterrand left office, they were both apostles of modernising former European Commission chairman Jacques Delors-- Aubry is his daughter, Hollande his protege.
Even before the result was confirmed, Jean-Francois Cope, leader of Sarkozy's UMP warned: "This evening we'll have an opponent, and we'll finally be able to demand some answers."
As Monday's Le Figaro newspaper put it; "The problems for Francois Hollande start now."