The 38-year-old son of an Indian immigrant will also be the youngest-ever person to hold the office of Taoiseach after succeeding Enda Kenny.
The new ruling Fine Gael leader won 57 votes in the Irish parliament against 50 for his nomination as premier. Some 45 parliamentarians abstained in the vote.
Accepting his elevation to the most powerful office in the country, the 38-year-old said: "I've been elected to lead but I promise to serve."
Mr Vardkar, who was nominated in parliament by departing Mr Kenny, won the votes of the independent lawmakers backing his Fine Gael party's minority government and secured the abstention of main opposition party Fianna Fail.
"As the country's youngest holder of this office, he speaks for a new generation of Irish women and Irish men, he represents a modern, diverse and inclusive Ireland and speaks for them like no other," Mr Kenny told parliament ahead of the vote.
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