The political bloodletting means Ms Gillard will return to the backbench and will leave politics altogether at the election.

She congratulated Mr Rudd on his election and said she would see Ms Bryce later in the evening to resign her commission and advise her of Mr Rudd’s election as Labor leader.

Ms Gillard’s demise brings to an end a tumultuous three years in which she broke through the ultimate glass ceiling but during which Labor’s vote slumped to a position where it faced almost certain defeat at the polls.

But her demise has also plunged Labor into even deeper turmoil, with several senior figures resigning in protest and the party showing few signs of being able to present a united front to voters.

Deputy Prime Minister and Treasurer Wayne Swan resigned, making way for the left’s Anthony Albanese, who becomes deputy Labor leader and leader of the House of Representatives but not treasurer.

That job is likely to go to former immigration minister Chris Bowen, who gathered the numbers for Mr Rudd.

Finance Minister Penny Wong has become the government’s No. 3 minister, replacing Communications Minister Stephen Conroy as government leader in the Senate.

Ms Wong was elected unanimously by the caucus. Mr Conroy will return to the backbench after declaring, well before the ballot, that he would not serve under Mr Rudd.

Other high-profile ministers to go include Climate Change Minister Greg Combet, Trade Minister and Gillard confidant Craig Emerson, Agriculture Minister Joseph Ludwig and School Education Minister Peter Garrett.

In his pitch to colleagues made publicly when he announced his intention to stand, Mr Rudd promised there would be no retribution or discrimination for Gillard-aligned MPs.

Elected with a relatively slim majority of 57 votes to Ms Gillard’s 45 in he 102-member caucus, Mr Rudd’s return has dramatically re-drawn the Australian political landscape, forcing Tony Abbott’s Coalition to reset its campaign approach for another, more popular opponent.

The sudden and risky late-term leadership change means Australians will probably head to the polls even before Ms Gillard’s nominated date of September 14, in an election contest pitting Mr Rudd directly against Mr Abbott for the first time.

Ms Gillard’s spectacular removal followed a sustained campaign of destabilisation by backers of Mr Rudd, which culminated in the circulation of a caucus petition seeking a leadership spill followed by Ms Gillard’s decision to call it herself.

Citing the ongoing damage inflicted on her government by three years of disunity since she took over as leader, she eventually yielded to the pressure on the strict condition that whoever lost the contest would agree to leave Parliament at the election.

“We cannot have the government or the Labor Party go to the next election with a person leading the Labor Party and a person floating around as the potential alternate leader,” she told Sky News just after 4pm.

“In those circumstances, I believe anybody who enters the ballot tonight should do it on the following conditions: that if you win, you’re Labor leader; that if you lose, you retire from politics.”

She said she had faced a near-impossible task.

“We cannot be in a circumstance ... for much of my prime ministership if the truth be told, where I have been in a political contest with the Leader of the Opposition, but I’ve also been in a contest with people from my own political party,” she said.

“No leader should be in that position in the run-up to an election.”