Mr Cameron, a self-proclaimed moderniser whose youth and style remind many of Blair, faces the challenge of leading the Conservatives back from the political wilderness after three disastrous election defeats.
Mr Cameron rolled up 134,446 votes from party members, more than doubling the 64,398 for David Davis, 56.
"People are crying out for a Conservative Party that is decent, reasonable, common-sense and in it for the long term of this country," Mr Cameron said after the vote was announced.
"We have to change in order for people to trust us," he said, promising to end what he called the "scandalous" under-representation of women in party offices and to put an end to grumbling about modern Britain.
Mr Cameron spoke without notes, talking of reforming public services, committing to climate change goals, improving the quality of life for Britons, protecting national and international security, reforming police and protecting pensioners.
He becomes the party's fifth leader since Margaret Thatcher.
Supporters say Mr Cameron, a product of the elite private school Eton, can be the party's saviour.
Mr Cameron's vigour and passion have prompted comparisons to Mr Blair, who was 41 when he took the reins of the Labour Party and turned it into an electoral powerhouse.
Both men are products of Oxford University, are powerful debaters and savvy media operators. For the Conservatives, it is an opportune time to take on Mr Blair.
The prime minister's grip on power appears weakened, his popularity remains in a slump after the divisive Iraq war, and a rebellious band of his own party members are clamouring for him to step down.
Mr Cameron faces his first test against Mr Blair in a few hours time when they go head to head for the first time at prime minister's questions in the House of Commons.
However Mr Cameron’s Labour Party rival as the next British leader is expected to be the Chancellor, Gordon Brown, as Mr Blair has said he will will not contest the next election.