Lord Pearson of Rannoch will take over from Nigel Farage, who has been in charge for three years, after polling 48% in a ballot of party members.
He was granted a peerage by Margaret Thatcher in 1990 but had the Tory whip withdrawn in 2004 after suggesting voters should support UKIP in that year's elections.
He is a strong supporter of freedom of speech and earlier this year invited the right-wing Dutch politician Geert Wilders to Britain to screen a controversial film about Islam.
In his acceptance speech today Lord Pearson said his ambition was to win enough support to force a hung Parliament in next year's general election.
UKIP campaigns for Britain's withdrawal from the European Union.
