He emerged the winner of the five-way contest within the centre-left DPJ when he gained 215 votes in the second-round ballot, against 177 for the trade and industry minister, Banri Kaieda.
Noda, 54-years-old, is known as a fiscal hawk and a safe pair of hands rather than a charismatic leader. He has pledged a "middle-of-the-road" politics promising to push for a speedy recovery from the 11 March disaster and its economic impact.
He also vowed to unite the deeply divided ruling party so that "everyone works together for the sake of the people."
Noda recently angered Japan's neighbours, including South Korea, when he said on the anniversary of Japan's World War II surrender that Class-A war criminals convicted by an Allied tribunal were in fact not war criminals.
The son of a paratrooper in the Self-Defense Forces, Noda holds broadly conservative views, opposing the granting of voting rights to ethnic Korean permanent residents living in Japan.
As Kan's finance minister, he has led mixed efforts to revitalise an economy plagued by decades of deflation and struggled to bring down huge public debt and a strong yen, near post-war highs, that is hurting exporters.
The close contest for the post reflected a bitter fight within the DPJ amid public disenchantment over the government's response to the 11 March quake-tsunami disaster and the resulting Fukushima nuclear accident.