Former Israeli Prime Minister Binyamin Netanyahu has won the leadership of the right-wing Likud party.Mr Netanyahu was declared the winner shortly after Foreign Minister Silvan Shalom conceded defeat.
Mr Netanyahu is thought to have won about 47% of the vote, with Mr Shalom polling about 32%.
Prime Minister Ariel Sharon, who is due to leave hospital on Tuesday after a stroke, left Likud last month. A general election will be held in March.
Mr Netanyahu, 56, opposed Mr Sharon's pull-out of Israeli settlers from the Gaza Strip earlier this year.
He quit his cabinet post as finance minister in protest at the move.
"Netanyahu has been restored to his natural place at the helm of Likud, and with God's help he will also become prime minister," Likud MP Yuval Steinitz told Israeli television.
Initial vote counts, including seven of the 149 voting stations, gave Mr Netanyahu 43.1% and Mr Shalom 37.4%, the Associated Press news agency reported.
Hardline candidate Moshe Feiglin is said to have won 15% of the vote, with agriculture minister Israel Katz in fourth place with 6%.
Candidates need to secure more than 40% of the vote to avoid the contest going into a second round.
Party officials put the turnout at about 40% of the 130,000 members who were entitled to cast ballots.
It had always been thought likely that Mr Netanyahu would win, says the BBC's Richard Galpin in Jerusalem.
He has staked out a very clear position, rejecting the handing back of any more occupied territory to the Palestinians unless it is first put to the Israeli people in a referendum.
Likud is currently in third place in opinion polls for the country's forthcoming general election, with Mr Sharon's newly created Kadima party leading the way.
"Initial checks showed he had a light stroke and during checks his condition improved. He was always conscious and didn't need any surgical intervention." Israeli Prime Minister Ariel Sharon suffered a mild stroke Sunday night and was rushed to Jerusalem's Hadassah Hospital for treatment, hospital officials said. Aides said he was in good condition and still able to conduct the affairs of state.
"Unequivocally there is no damage," Sharon's personal physician, Dr. Bolek Goldman, said. "He had anti-coagulent treatment. He will need to be in the hospital for a few days."
Sharon never lost consciousness and his condition quickly improved, said Yuval Weiss, deputy director of the hospital. A decision would be made Monday on when to release the premier, a Sharon aide said on condition of anonymity because he was not authorized to speak on the issue.
"Initial checks showed he had a light stroke and during checks his condition improved. He was always conscious and didn't need any surgical intervention," Weiss said, adding that Sharon was speaking with his family.
Sharon, 77 and very overweight, has been a political fixture of Israeli politics for more than three decades. Last month he broke away from his hardline Likud Party and formed the centrist Kadima faction to contest March 28 parliamentary elections.
The nascent party, which has a commanding lead in the polls, is built around Sharon, and it was unclear what would happen if Sharon were too ill to campaign. If Sharon were incapacitated, Vice Premier Ehud Olmert, a close Sharon ally, would take over the government. The premier's illness would have little effect on Israeli policy or peace efforts, since no major decisions were expected during the campaign.
Sharon had just finished a meeting Sunday evening with government officials to discuss poverty when he felt weak, Israeli media reported. The premier was immediately rushed to the hospital in his official vehicle, all nearby roads were closed and he was brought directly to the emergency room, media reports said.
In an interview Friday with The Associated Press, the top American diplomat said she understands the desire among Iraqis for a quick exit of U.S. forces. She would not, however, promise that the successful elections this week would hasten their withdrawal.
"For a proud people like the Iraqis, nobody wants to have foreign forces on your soil," Rice said. "They want to take responsibility for their own future. I think that's a healthy thing."
Rice also said President Bush has done nothing illegal or unconstitutional in the war on terror. She would not comment on a news report that he authorized domestic eavesdropping by a spy agency without requiring court approval.
On another topic, Rice signaled that the United States has all but written off international negotiations to head off Iran's disputed nuclear program and is waiting for other nations to come to the same conclusion.
She praised Thursday's national elections in Iraq as evidence of the nation's rapid progress since the fall of Saddam Hussein's regime 2½ years ago.
"We're seeing that the political process is moving along and moving along with speed and maturity that I believe would have been unthinkable a couple years ago," Rice said.
The administration has refused to set a timetable for withdrawal of U.S. forces in Iraq, saying that would play into the hands of terrorists.
"Yes, the time is coming, but I think everybody understands that no one wants coalition forces to leave before the job is done," Rice said.
The top U.S. military commander in Iraq said Friday that he will soon make recommendations about troop withdrawals. Speaking from Iraq, Gen. George Casey said about 15,000 troops added to help with the election should be gone by the end of February.
Rice refused to comment on reports that Bush authorized a spy agency to eavesdrop without warrants on people inside the United States.
"I can tell you this: The president of the United States took an oath to protect and defend the United States Constitution and he has been doing precisely that," she said.
"This president has operated within the law, within his constitutional authority, within his responsibilities, and that's an assurance that I think will stand the test of time."
On Iran, Rice said "everybody continues to hope" that the country's new hardline leadership will resume negotiations in Europe over giving up a suspected weapons program. But, she said, "I haven't seen any evidence that Iran is interested in a deal that is going to be acceptable to an international community that is extremely skeptical of what the Iranians are up to."
Rice predicted the United States would have enough votes at the U.N. Security Council to impose international sanctions against Iran but hinted she was waiting for other nations to join such an effort.
"We also recognize that it is important for others to also come to the conclusion that we've exhausted the diplomatic possibilities," she said.
Rice said anew she has no desire to be president, but declined an invitation to rule out a bid in 2008, when Bush's term is up. "I've said I don't want to be president and that ought to say it," she said.
"I'm flattered" by the speculation, said Rice, the most popular member of the administration as measured by opinion polls, but "I've got my hands full and I know what my skills are."
After serving as White House national security adviser, she succeeded Colin Powell in January to become the first black woman to be secretary of state.