Nobel prize winner Jose Ramos-Horta is on course to be East Timor's next president, bringing congratulations from Australia and New Zealand.
Mr Ramos-Horta (r) is an ally of the outgoing president (l)
Election officials said Mr Ramos-Horta had won nearly 70% of the vote, but the official result has yet to be declared.
His rival, Francisco "Lu Olo" Guterres, has conceded defeat.
Although Mr Ramos-Horta has not yet formally declared victory, he has already made a speech vowing to heal the wounds of the troubled nation.
Australian Prime Minister John Howard was among the first to offer his congratulations to Mr Ramos-Horta, whom he called "a person of great dedication and... a good friend of Australia".
New Zealand's Foreign Minister Winston Peters said he hoped to work with Mr Ramos-Horta "in the difficult task of strengthening [East Timor's] young and fragile democracy".
Mr Ramos-Horta, the current prime minister, is widely seen as more friendly with the West than Mr Guterres, of the ruling Fretilin party, who often takes a more leftist, nationalist line.
Hard work ahead
The election commission said on Friday that, with all the ballots counted, Mr Ramos-Horta had taken 69% of the vote and Mr Guterres 31%.
The final result is expected to be officially released later after it has been given court approval, a commission spokeswoman said.
Founder of East Timor's independence movement
Spent 24 years in exile after Indonesia invaded
Won Nobel Peace Prize in 1996
Former journalist, fluent in five languages
Mr Ramos-Horta said the result was not a cause of celebration, but the start of five years of hard work ahead.
"I will honour what I told the people in the campaign: I will work for the poor, with the entire country, to unite it, and heal its wounds," he said.
Mr Guterres conceded defeat, telling reporters he would "bow to the will of the people" and "do everything possible to support Ramos-Horta".
The result is a blow to the left-wing Fretilin party, which has been a major force in East Timor politics.
Fretilin appears to have fallen out of favour with voters since last year's violence between rival security forces, which resulted in street battles that left more than 30 dead and tens of thousands homeless.
The party will have a fight on its hands to stay in government in next month's parliamentary elections, a correspondent in Jakarta says.
The outgoing president Xanana Gusmao - an ally of Mr Ramos-Horta who has led the nation since it won independence five years ago, after breaking free from decades of Indonesian rule in 1999 - plans to run for the more powerful position of prime minister in the election.
Observers hailed Wednesday's run-off as peaceful and free of intimidation - in contrast to the first round, which was marred by irregularities and fighting between rival supporters.
This has raised hopes that the vote may prove to be a turning point for the impoverished and violence-wracked nation.