The 66-year-old socialist, who began the contest as a rank outsider, was widely projected to win and saw off a challenge from frontbenchers Andy Burnham, Yvette Cooper and Liz Kendall.
He gained 2,51,417 or 59.5 per cent of first preference votes - 40 per cent more than his nearest rival Burnham, who got 19 per cent. Cooper was third on 17 per cent and Kendall a distant fourth with 4.5 per cent of the votes.
The result has also sparked talk of a deep split within the Labour party that was thrown into turmoil by David Cameron's shock May election win.
The leftwinger, who has spent his entire 32-year career in the House of Commons on the backbenches, promised to fight for a more tolerant and inclusive Britain - and to tackle "grotesque levels of inequality in our society".
Corbyn was backed by few Labour MPs but he came way ahead of his rivals among party members and trade unionists.
His supporters chanted "Jez we did" as he took to the stage, putting on his glasses to deliver his acceptance speech.
He said the leadership campaign "showed our party and our movement, passionate, democratic, diverse, united and absolutely determined in our quest for a decent and better society that is possible for all".
The Islington North MP said his first action as Labour leader would be to join a demonstration with refugees.
Shadow health minister Jamie Reed, who has been an outspoken critic of Corbyn, announced his resignation from the Labour front bench within seconds of his victory.
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