Interior minister Theresa May and eurosceptic rival Andrea Leadsom have emerged as the two candidates who will battle to become Britain's next Prime Minister and lead the country out of the European Union.
Ms May won 199 votes and Leadsom 84 in a second ballot of MPs of the governing Conservative party on Thursday.
Justice Secretary Michael Gove took just 46 votes and was eliminated from the race.
"This vote shows that the Conservative Party can come together, and under my leadership it will," Ms May told supporters after the results were announced.
Around 150,000 grassroots Conservatives across the country will now vote to decide whether Ms May or Ms Leadsom becomes Britain's first woman Prime Minister since Margaret Thatcher was forced from office in 1990.
The result of the contest is expected by September 9, meaning businesses and investors must endure two more months of uncertainty over who will lead the huge task of disentangling Britain's economy from the EU while trying to safeguard trade and investment.
Prime Minister David Cameron said last month he was stepping down after voters, many of them swayed by concerns over high immigration and a desire to reclaim "independence" from Brussels, rejected his entreaties to keep Britain in the EU and his warnings that leaving would spell economic disaster.
"This vote shows that the Conservative Party can come together, and under my leadership it will," Ms May told supporters after the results were announced.
Until a couple of weeks ago Ms Leadsom, a junior energy minister, was barely known to most Britons, but as one of the leading voices in the successful Leave campaign she has dramatically emerged as a serious challenger as better-known rivals have been felled by political intrigue.
"She's the future. What you want is someone who's not been in the Westminster bubble, she's had a real job in the real world and that's what people are looking for. I think they're fed up with the political elite," said Ms Leadsom backer Peter Bone.
Interior minister May, 59, has served for the past six years in one of the toughest portfolios in government. Ms Leadsom has never been a member of the cabinet.
But despite her strong lead in the vote of MPs, Ms May is far from assured of winning the race for Downing Street. During the referendum campaign she took a low-key stance in favour of Britain remaining in the EU - unlike Ms Leadsom, who fought on the winning side.
Grassroots party members have strong eurosceptic leanings, a factor that could favour Ms Leadsom.
The 53-year-old, who entered parliament only six years ago, said on Thursday her top priority would be to guarantee tariff-free trade with the EU after leaving.
But the EU is likely to insist that this would only be feasible if Britain continued to allow other EU nationals to live and work freely in Britain, an arrangement that has pushed immigration to record levels and was a powerful factor behind the success of the Leave side in the referendum.
Ms Leadsom is facing allegations that she exaggerated her role working in financial services after putting that experience at the centre of her campaign to be the next leader.
Ms Leadsom said she had given a full account of her past jobs as some of her career credentials were called into doubt by former colleagues.
Before entering parliament in 2010 she spent a decade working at Barclays Bank and Invesco Perpetual, one of the country's biggest retail fund managers.
Ms Leadsom has often referred to her 25 years of experience in finance, recounting how she spent the weekend helping Eddie George, the late governor of the Bank of England, calming the fears of bankers after the merchant bank Barings collapsed.
However, Peter Norris, the chief executive of Barings at the time, said he had "absolutely no recollection of her at all" in the failed attempt to rescue the bank, one of the biggest financial crises in modern British history.
In a blog in 2009, Ms Leadsom wrote that over the weekend that Barings collapsed she was "in the thick of it" as the Bank of England Governor attempted to reassure markets and prevent a run on the banks.
Responding to allegations she had exaggerated her experience working in finance, Ms Leadsom told the BBC on Thursday that the criticism was "ridiculous" and her experience is "all absolutely true".
In an interview with the BBC on Sunday, Ms Leadsom spoke about her past "running enormous teams, small teams," running a start-up business and being part of a huge bank.
But Reuters spoke to five former Invesco colleagues, including four in senior management positions, who said Ms Leadsom did not have a prominent role or manage client money.
Reuters
