Barak's victory, by a margin of 53 percent to 47 percent over lawmaker Ami Ayalon in a party runoff, represents a remarkable political rebirth for the ambitious and strong-willed leader who lost in 2001 to the hawkish Ariel Sharon.
"Today begins the journey toward restoration," Barak told supporters early today during a brief victory speech at party headquarters in Tel Aviv.
Ayalon's campaign made allegations of vote fraud, setting the stage for a possible challenge of the results.
Most analysts here say it is unlikely that Labor would immediately bolt from the governing coalition led by Prime Minister Ehud Olmert of the centrist Kadima party.
Barak and Ayalon, a relative newcomer to politics, had called for Olmert to step down after a highly critical review of his government's performance during the conflict last summer against the Hezbollah militia in Lebanon. But Labor lags behind in national opinion polls, and many members fear that holding elections soon would benefit Benjamin Netanyahu, leader of the right-wing party Likud.
Barak has said he would be willing to sit in Olmert's government, presumably as defense minister, but would press to schedule national elections. Several of Barak's supporters in Labor are Cabinet ministers who want to keep their jobs.
With 19 seats in the Israeli parliament, Labor is the biggest coalition partner. If Labor stays in the government, it would give Olmert breathing room at least until the commission examining the Lebanon war issues its final report, expected by late summer.
Barak, who does not now hold public office, sees himself as a future prime minister and is expected to make use of a Cabinet post to ready his party for national elections.
Barak will take over a party that once dominated Israeli politics but that has been on the sidelines for much of the time since 2001.
Several key figures, including former Prime Minister Shimon Peres, left for Kadima when Sharon, then prime minister, formed that party in late 2005 before being incapacitated by a stroke.
The Labor runoff featured two men from military backgrounds who ran security-themed campaigns after last summer's inconclusive war, which many Israelis viewed as a defeat. Barak was a general and former army chief. Ayalon was a navy admiral who later headed the Shin Bet domestic security agency.
Barak retreated from Israeli politics after losing to Sharon following the outbreak of the Palestinian uprising in September 2000. The violence came after the collapse of the Camp David peace talks, and many Israelis held Barak at least partly responsible for both. His tenure lasted just 20 months.
Barak, 65, got rich as a business consultant and stayed away from politics before announcing that he would pursue the Labor leadership post. Seeking to shed a reputation of being arrogant and impatient, Barak said he had changed for the better.
Ayalon, 61, played on his relative inexperience in politics and an image of moral rectitude at a time when a number of Israeli leaders have faced allegations of wrongdoing. Ayalon co-sponsored a peace initiative along with Sari Nusseibeh, a moderate Palestinian academic.
Ayalon might have hurt himself in the runoff by forming an alliance with Amir Peretz, the defense minister, who finished a distant third in the first round of voting, held May 28.
Exit polls showed a drop in support for Ayalon from the kibbutz movement, which bolstered him in the first round. Members of the kibbutz movement, long dominated by Jews of European extraction, chafed at comments by Peretz that alleged bias against Jews from the Middle East and North Africa.
Barak carried the kibbutzim this time and also ran well among Arab citizens, exit polls showed.
Ken Ellingwood writes for the Los Angeles Times.