Nuttall promised to unite the party -- a driving force behind Britain's vote to leave the EU -- which has been under threat from bitter infighting and a plunge in funding following Farage's departure announcement.
In his farewell speech, Farage promised he would not be a "backseat driver" in the party but would see out his term as European Parliament lawmaker until 2020 and continue with his Brexit campaigning.
"Be in no doubt that it is UKIP that is seen as the leading eurosceptic group across the entire continent," Farage said at a conference in London where the result of the leadership ballot of party members was announced.
Tensions within UKIP burst into the open when newly-elected party leader Diane James stepped down in October just 18 days after winning a previous leadership ballot.
A fight then broke out between UKIP MEPs in the European Parliament in Strasbourg that put then leadership favourite Steven Woolfe in hospital.
Since announcing his resignation following the EU referendum in June, Farage has ridden the wave of his campaign's success to the United States where he appeared at a Trump rally in Mississippi.
Despite holding no public office, the beer-drinking "man of the people" -- as he is often described -- became the first British politician to meet Trump following the Republican's shock election win.
Trump even recommended his anti-establishment ally as US ambassador, in a tweet that ruffled feathers in Downing Street, with British Prime Minister Theresa retorting that there was "no vacancy".
In a speech to guests posted on YouTube he said 2016 had been "the year of the big political revolution".
"When people look back in 100 years, 200 years, 2016 will stand out as one of those great historic years," he added.
Farage's exuberance cannot mask the turmoil engulfing his party, however.
Adding to the leadership fiasco, UKIP was accused this month of using EU funds to finance its Brexit campaign, in breach of party funding rules.
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