She beat CDU rival Friedrich Merz narrowly, claiming 517 votes of the 999 cast by party delegates.
On the campaign trail for the post of party leader, Ms Kramp-Karrenbauer gained a reputation for explaining her politics by means of homely anecdotes from her small village just a few kilometers from the French border.
Majority defected to the far-right Alternative for Germany over Merkel's controversial decision to openly welcome asylum seekers back in 2015 when hundreds of thousands of Syrians, Iraqis, Afghans and others came to Germany and other European Union countries to escape war and poverty.
As both women will have been well aware, an endorsement from Merkel - already associated with an era from which the party is desperate to move on - may well have done more to hinder than to help her chances.
The Christian Democratic Union (CDU) chose the former chief minister of Saarland on Friday to replace Mrs Merkel as party leader.
Markus Frohnmaier: I believe that she will do it till the end of her term, because for her power is very important and, of course, the fact that she had to change her opinion about this, that the head of the CDU also has be the Chancellor of Germany and the Chancellor of Germany needs to be the head of the CDU.
Earlier, an emotional Merkel bowed out as party leader, telling the congress: "It has been a great pleasure for me, it has been an honor". A third candidate, Health Minister Jens Spahn, was eliminated in a first round of voting.
"Domestically, AKK is likely to sharpen the social policy profile of the CDU and she can appeal to some on the party's more conservative wing", Jorns Fleck, an expert on German politics, told Newsweek.
She was previously a popular governor of western Saarland state.
Merkel, however, recalled that the CDU was in a deep crisis when she took over in 2000, mired in a party financing scandal surrounding ex-Chancellor Helmut Kohl. She moved her party relentlessly to the centre, dropping military conscription, accelerating Germany's exit from nuclear energy, introducing benefits encouraging fathers to look after their young children and allowing the introduction of gay marriage.
She added: "I learned what it is to lead - and above all learnt that leadership is more about being strong on the inside than being loud on the outside".
"I hope we emerge from this party conference well-equipped, motivated and united", Merkel said, after accepting a standing ovation from delegates in Hamburg, many holding "Thanks, boss" placards aloft.
She also celebrated Germany's balancing its budget in recent years and its response to the eurozone debt crisis.
For years, Merkel's popularity lifted the CDU and its Bavaria-only sister party, the Christian Social Union.
"She is a safe bet: a centrist candidate who does not threaten nasty surprises", said Josef Joffe, publisher-editor of weekly Die Zeit.
While Merkel remains popular, AKK inherits a diminished party which is now polling at roughly 30 percent, far below the about 40 percent enjoyed during Merkel's heyday. "But. we faced an hour of destiny for the Christian Democratic Union 18 years ago".
"I am grateful for the time that is behind me, and I am glad for being able to continue working as chancellor", she said.
"We have to have the courage to buck the zeitgeist", Kramp-Karrenbauer said in her speech to delegates. "I have always wanted to do my government and party jobs with dignity, and one day to leave them with dignity. now it is time to open a new chapter".
- CNN Offices Evacuated Over Bomb Threat During Don Lemon Show
- NASA’s new Mars robot just sent back some awesome photos
- ‘Kedarnath’ screening banned across Uttarakhand, says state tourism minister
- Can Manchester United win the Premier League this season?
- Jose Mourinho: Manchester United boss happy at club, says agent
- Woman dies from brain-eating amoeba after using neti pot
- Images Reportedly Show Expansion of NK Missile Base
- ‘Marvel’s Spider-Man’ Was Completely Snubbed At The Game Awards 2018
- What A Yield Curve Inversion Means For Traders
- Mortal Kombat 11 bringing more ultraviolence in April