Kevin Rudd is set to become to prime minister again after emerging victorious from the Labor leadership ballot.
The Queensland backbencher defeated Prime Minister Julia Gillard, who has pledged to retire from politics at the upcoming election, by 57 votes to 45.
Mr Rudd becomes Labor leader and will now look to be sworn in as prime minister by the Governor-General.
Labor whip Chris Hayes said both contestants spoke before the caucus vote.
"The mood was quite sombre," he said.
"Most people are happy that the issue of the leadership is now put behind us so the party can now concentrate on preparing for the September election."
The meeting took almost an hour to get a result on the leadership because the votes were counted one by one.
"I think the prime minister wanted certainly to advise of her vision and the strength over her leadership in pursuing that vision for the nation," he said.
"Any of these challenges, I think, are particularly emotional.
"They're all human beings out there so please take that into account."
Mr Hayes wasn't able to give any further comment about the meeting which was continuing.
However, it's believed Ms Gillard's deputy, Treasurer Wayne Swan, has resigned his cabinet position.
Mr Swan had previously said he wouldn't serve under Mr Rudd.
Anthony Albanese becomes the new deputy leader after fighting off a challenge from Simon Crean, 61 votes to 38, Mr Hayes said.
Senator Penny Wong unanimously won the ballot for Leader of the Senate, taking over from Stephen Conroy.
Jacinta Collins becomes the senate deputy leader.
Climate Change Minister Greg Combet has quit following Kevin Rudd's return to the Labor leadership.
Trade Minister Craig Emerson has also quit his ministerial positions and announced his retirement from politics.