John Key, a 47-year-old multimillionaire former foreign currency trader and leader of the conservative National Party, swept easily to power in this South Pacific country of 4.1 million people. He did so by ousting Prime Minister Helen Clark's Labor Party.
"Today, New Zealand has spoken, in their hundreds of thousands, they have voted for change," Key said in his victory speech, borrowing a slogan from U.S. President-elect Barack Obama.
The worldwide financial crisis loomed large during the campaign, and Key named it as the biggest challenge facing the country.
"The state of the global economy and the global financial crisis means that the road ahead may well be a rocky one," Key said. "Now, more than ever, New Zealand needs to be on top of his game.
"Tomorrow, the hard work begins."
Prime Minister Helen Clark conceded defeat, telling supporters that "tonight is not our night."
Clark, 58, has led the country since 1999 and was seeking a fourth term. She said she would remain in Parliament but will quit as Labor Party leader, a post she has held since 1993.
"So, with that it's over and out from me. Thank you New Zealand for the privilege of having been your prime minister for the last nine years, Kia ora Tatou," she said, reciting a farewell in the indigenous Maori language.
The National Party will have to rely on small allied parties to form a majority in Parliament, which under a complex proportional voting system will shrink by one seat to 122.
Key will not need the support of the Maori Party, which won five seats. He said he would reach out to the Maori Party anyway, and seek their support in Parliament.
Key campaigned on domestic issues such as improving education and fighting crime, and blaming Clark's government for the recession.
But he offered few big policy differences from Labor. Foreign affairs and trade policies are unlikely to change - including the long-standing ban on nuclear-powered ships entering New Zealand ports that has rankled military ally the U.S.
Clark had urged voters not to change governments because the economic crisis meant New Zealand needed consistency. She accused Key of stealing Labor's policies, and of having a hidden right-wing agenda.
Allies within Key's coalition indicated they would try to squelch a move to the far right.
"The last thing New Zealand needs now with a new government is an outburst of extremism," said United Future Party leader Peter Dunne, who is aligned with the Nationals and has been offered a ministerial post.
Clark was also hurt by a series of scandals this year, including fallout from fraud investigations into former Foreign Minister Winston Peters' party. Peters' New Zealand First party appeared to have lost all seven of its seats in Parliament, ending his 30-year career as a lawmaker.
By Associated Press Writer Rohan Sullivan; AP writer Ray Lilley contributed to this report