Mrs Simpson Miller, 60, beat three others to become leader of the People's National Party (PNP) in an emotionally charged election involving more than 3,800 party delegates.
Currently the minister of local government, community development and sport, she will be appointed prime minister when Percival James (PJ) Patterson retires.
Mr Patterson, 70, who has been in power for 14 years and is currently in his third five-year term, said last year he would step down before the start of the next legislative year on 1 April.
"Tonight I give the glory to God almighty and a big thank you to the delegates of the PNP and the Jamaican people," said Mrs Simpson Miller. "Team Portia has now completed its work with tremendous success and now it becomes team Jamaica.
"I accept your mandate to serve as president of the PNP. I pledge to honour my commitment to serve as leader for all Jamaica."
She won 1,775 votes, to beat the national security minister Peter Phillips, who had 1,538 votes, finance and planning minister Omar Davies with 283 votes and the former water and housing minister Karl Blythe with 204.
Dr Phillips, a former Rastafarian, who served as transport and health minister, had been seen as the favourite to replace Mr Patterson.
But since he became national security minister in October 2001, there have been more than 4,000 murders amid a surging crime rate. The death toll was thought to have been a factor that counted against him in the vote.
Mrs Simpson Miller becomes the fourth president of the party, which was founded by former premier Norman Manley. She is seen as the very heart and soul of the PNP.
She was elected as a Kingston councillor in 1974 and quickly rose through the ranks to become the party vice-president by 1978. By 1983, she was the party's spokeswoman on women's affairs, pensions, social security and consumer affairs, but it was six years before she actually became an MP.
Just three years after entering parliament she stood against Mr Patterson to lead the party when Mr Manley resigned, but suffered a crushing defeat.
Mrs Simpson Miller, who is married to the former president of Cable and Wireless Jamaica, Errald Miller, remained popular despite media accusations that she was not intelligent enough to be in government.
She helped fend this off when she took a degree in public administration at an educational institute in Miami.
Radio Jamaica's Kathy Barrett said: "She is seen as someone who has really risen through the ranks of the party, coming from a very, very poor section of Jamaica... to the top post.
"She's a women who's very determined, a firebrand type of politician who has really hit home when it comes to the majority of people - especially women, the poor and the unemployed."