Amir Peretz, leader of the Israeli trade union federation Histadrut, has supplanted Labour's veteran leader Shimon Peres to head the party.
Amir Peretz wants to rebuild Labour into a party of social concern
The change comes at a critical moment for the country and for the politics of the region.
Mr Peretz, 53, with his trademark moustache, represents not just a new generation of Labour leader, but also a quest to return the party to its social democratic roots.
His goal is to reverse the political upheaval of 1977 when Likud first came to power, an event that ended Labour's traditional dominance of the Israeli political system that had lasted since the creation of the state in 1948.
Born in Morocco in 1952, he immigrated with his family to Israeli in 1956, and settled in the immigrant development town of Sderot in southern Israel, near the Gaza Strip.
After an injury forced him out of the army, he entered local politics to become the mayor of Sderot, where he still lives.
He was elected to parliament as a Labour candidate in 1988, but was in and out of the party, with his breakaway faction, One Nation, until this year.
He is a member of Peace Now, the Israeli pacifist organisation that campaigns for a Palestinian state, and supported Israel's withdrawal from Gaza.
"I see the occupation as an immoral act, first of all," he is quoted as saying. "I want to end the occupation not because of Palestinian pressure, but because I see it as an Israeli interest."
Likud swept to power on a wave of support from poorer Sephardi voters, Jews who originally came from Arab countries.
A Sephardi himself, Mr Peretz wants to rebuild Labour into a party of social concern to appeal to the young and new immigrants.
He believes that his background could enable Labour to make significant inroads into the Sephardi ranks of traditional Likud voters.
However, earlier efforts to pass the torch to a new generation of Labour leaders have largely failed at the ballot box.
The dovish Mr Peretz is also untested in foreign policy matters.