Ms Hall, a London Assembly member and former council leader, defeated Moz Hossain KC, a criminal barrister and political novice, in the ballot of about 20,000 London Tory members.
The result was announced at the Battle of Britain Bunker in Uxbridge by Tory party chairman Greg Hands in front of MPs and supporters.
The venue, which has a replica Spitfire and a Hurricane aircraft hanging from the ceiling, was chosen by party officials to represent the “underdog winning” and indicate their belief that the Tories can deliver a shock victory next May.
Ms Hall had been regarded as the most likely winner after a third candidate, Daniel Korski, withdrew from the race after being accused by TV producer and novelist Daisy Goodwin of groping her when he worked as a Downing Street aide a decade ago. He denies the allegation.
Ms Hall, a grandmother known for her plain speaking, faces a mighty challenge to defeat Mr Khan, who will seek a historic third mayoral term next May.
She won by securing 57 per cent of the votes cast to 43 per cent for Mr Hossain.
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