Leadership contenders David Cameron and David Davis are through to a run-off vote of the Conservative Party's 300,000 members after a ballot of MPs.
The candidates now go before the wider membership
Mr Cameron topped the poll, taking 90 of a possible 198 votes, while Mr Davis was second on 57. Rival Liam Fox was eliminated after gaining 51 votes.
Mr Cameron, 39, and Mr Davis, 56, will now enter a six week head-to-head campaign to woo the party grassroots.
The result of the vote of Conservative members is expected on 6 December.
Speaking shortly after the result a smiling Mr Cameron said he wanted to be a "voice for change, optimism and hope".
He wanted to lead a "21st-Century party that's modern" and "understands the hopes and dreams of people".
But later, in a sign the drugs question that has dogged his campaign is not about to go away, Mr Cameron was pressed in an interview on Channel 4 News into confirming he had never taken cocaine as an MP.
Mr Cameron has previously refused to answer questions about his alleged drug use, saying he had a "right to a private life before politics".
Mr Davis reacted to his second place in the MPs' ballot by saying Mr Cameron's support had "fallen a little short of their own forecasts" and said the "real battle" was just beginning.
He told reporters waiting outside the Commons that he wanted the party to "reach the parts of Britain it hasn't reached before", adding "I intend to fight for my beliefs."
Dr Fox congratulated his rivals but refused to endorse either.
He said he would "listen with great interest" to their policy pronouncements.
The BBC's political editor, Nick Robinson, said Mr Davis was "masses behind" in the contest, but clearly determined to fight on.
WHAT HAPPENS NEXT
Friday - candidates meet party officials to finalise rules for campaign
October to December - 11 hustings held around UK
4 November - ballots sent out to Conservative members
6 December - final result announced
He added that the contest had already swung one way, so Mr Davis would be hoping that it would swing back again.
In the first ballot of Tory MPs on Tuesday, Mr Davis came top with 62 votes, followed by Mr Cameron on 56 and Dr Fox on 42.
Ex-chancellor Ken Clarke was knocked out with 38 votes.
Mr Cameron, shadow education secretary, had been the bookmakers' favourite in the wake of a well received Conservative Party conference speech earlier this month.
Mr Davis, the shadow home secretary and early favourite for the contest, had seen his campaign lose momentum following a speech to the party's annual conference which some observers judged as disappointing.
Dr Fox, the shadow foreign secretary, had hoped to gain enough defectors from Mr Davis to get through.
The two remaining contenders are due to meet party officials on Friday to discuss arrangements for a nationwide series of hustings.
Michael Howard, who has formally resigned as leader, will carry on in a caretaker role until the final result is known.