Julia Gillard remains Prime Minister after Kevin Rudd refused to challenge for the top job.
Her leadership has been hampered by months of speculation that the man she ousted was planning a comeback.
But the issue was forced when Cabinet Minister Simon Crean called for a leadership spill, to put an end to the speculation.
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Ms Gillard called for a spill but minutes before the vote Kevin Rudd announced that he would not be standing.
That left Ms Gillard as the only candidate as leader.
The Caucus meeting took just 15 minutes to return Ms Gillard as Prime Minister and Wayne Swan as her deputy, as there were no other nominees for the positions.
Ms Gillard says she's humbled by her colleagues' support.
She says the government will now focus on matters such as making sure Australians have job opportunities, rolling out the National Broadband Network, and implementing the new National Disability Insurance Scheme.
She says she'll be Prime Minister at the September 14 election, and beyond, to make sure that work gets done.
"Today the leadership of the Labor Party has been settled and settled in the most conclusive fashion possible. The whole business is completely at an end. It has ended now. The government has a plan for the nation's future. We've got plenty of work to be getting on with. We''ll be getting on with in a few minutes time."
Simon Crean's call for a leadership spill followed leaks to the media and infighting that has been plaguing Labor for months.
Mr Crean says on current trends, he doesn't think Labor can win the election.
"We can't win from the position we're in in the polls. I don't believe our future and our chances in the polls is just going to be determined by a simple change of leader people have got to believe we have conviction that we believe in what we stand for there's a coherence of message and we are determined to pursue it."
Mr Crean threw his support behind Mr Rudd, saying he believed the former Prime Minister could change Labor's fortunes.
But Mr Rudd declined to challenge.
"This is a difficult day for the Labor Party and a difficult day for the Australian government. But I take my word seriously I have given that word. I gave it solemnly in that (caucus) room after the last ballot and I will adhere to that word today. I would therefore suggest to all and sundry across the party and the government that we unite in in ensuring that Tony Abbott does not simply walk into The Lodge (Prime Minister's residence) as if it's his own personal property."
Opposition Tony Abbott says Australia's experiment with minority government has failed.
He says with the next budget due to be handed down in May, the Labor Party should be focused on the economy, but instead it's focused on itself.
Mr Abbott says Australians need strong and stable government to prosper and flourish - and it would be better to hold an election straight away.
"The message that the people of Australia have received from this government is that nothing is resolved. The civil war goes on. The civil war will continue as long as Kevin Rudd and Julia Gillard are in the parliament. The only way to give our county the good government that we so badly need right now, at a difficult time in the life of our nation, is to have an election."
Mr Crean has now lost his frontbench position and Julia Gillard is looking for a new Regional Development Minister.
She'll be hoping that this ballot will put paid to leadership speculation in the lead up to the September 14 poll.
But not everyone is convinced.
Online bookmaker Sportsbet says it's already taking short odds on the chance that there could be another leadership spill.
