Banda beat off a challenge from Finance Minister Ng’andu Magande and 14 other candidates for the presidential election to choose a successor to late President Levy Mwanawasa.
Zambia, which became a rare African success story under Mwanawasa, faces economic and political uncertainty as the race to replace him intensifies.
Banda, 72, told officials of the ruling Movement for Multiparty Democracy (MMD) that he will continue with Mwanawasa’s policies if elected as the country’s new president.
"I want to work with all my comrades in order to unite the party and the country and keep on with our policies," Banda said.
He drew 43 votes and Magande 11. Only seven of 19 candidates contested the final vote after the others withdrew, MMD elections official Jeff Kande said.
Banda, who was appointed as Mwanawasa’s deputy in 2006, took over as head of the government after the president died last month.
He has held many diplomatic posts, including that of Zambia’s representative to the United Nations, before being made foreign minister in the 1970s in the administration of Zambia’s first post-independence leader, Kenneth Kaunda.
After his stint as foreign minister, Banda served as a parliamentarian between 1978 and 1988.
Magande said he supported Banda for president.
"I accept the defeat because this is democracy. … I will campaign for him in my constituency," Magande told Reuters.
The divisions within the ruling party could cost the ruling party ground to main opposition leader Michael Sata — who narrowly lost to Mwanawasa in 2006 presidential polls — particularly if infighting gets worse.
The MMD candidate will face a challenge from Sata, and Hakainde Hichilema, the leader of the United Party for National Development — which is the third largest party in parliament.
Investors hope Zambia’s new leadership will stick to Mwanawasa’s fiscal discipline, which won him praise from Western donors and billions of dollars in debt relief.
Some of the shine is also coming off Zambia’s economic performance. The kwacha has lost about 3 percent of its value against the dollar since Mwanawasa’s death, mostly due to political uncertainty although also the stronger greenback.