The Queenslander edged out former deputy leader Kevin Hogan and Senate leader Bridget McKenzie in a partyroom ballot on Wednesday morning and became the first to helm the party from the upper house.
Darren Chester was elected deputy leader and Senator McKenzie remained Senate leader.
The ballot was sparked after David Littleproud's shock resignation on Tuesday, when he surprised colleagues by stepping back from the leadership but vowed to remain as the member for his Queensland electorate of Maranoa.
Senator Canavan, one of the party's more conservative members, was a key campaigner in the coalition's decision to dump its net-zero emissions by 2050 target and is a major supporter of coal production, prioritising driving down energy prices over climate action.
His election provides insight into how the party room wants to handle the emerging threat of minor right-wing party One Nation, which has been siphoning coalition voters and is surging in the polls as the major conservative parties flail.
The leader put forward a nationalistic pitch as he vowed to take the fight to Labor and One Nation.
"I stood for this role because I think we are losing our country. People are losing their standard of living, they're losing their confidence. We're losing our relaxed and larrikin nature and we have to fight back for Australians," Senator Canavan told reporters after his election.
He called for Australia to use "all of our God-given resources for the benefit of the Australian people" to bring down cost of living pressures, a reference to more domestic coal and gas production.
"... we should run our energy system to deliver the lowest possible prices for Australians, that should be the primary goal. That is not the goal of this government, their goal is to meet arbitrary emissions or renewable energy targets," he said.
Senator Canavan will undertake a baptism by fire, with the Farrer by-election - sparked by the resignation of former Liberal leader Sussan Ley after she was knifed by Angus Taylor - scheduled for May 9.
A popular independent is again contesting the seat after whittling down Ms Ley's margin at the 2025 election, and it is the first real test for One Nation to see if it can convert popular polling into an electoral outcome federally.
Both nascent coalition leaders are under pressure to win the seat and shore up voters who are leaving major parties in favour of independents and minor parties.
Regional Queensland and NSW are considered particularly at risk of flipping to One Nation, threatening a number of electorates held by the Nationals.
Senator Canavan slapped down One Nation leader Pauline Hanson's divisive comments after she implied there were no good Muslims.
"I was very critical of Pauline's comments, dividing Australians into groups, saying that, suggesting that are no good ... I totally reject that," he said.
"We are all Australians, what unites us as a country is more than what divides us.
"I worry about where Pauline would take this country, to an area of more division."
The rural party held all its lower house seats but failed to win back Calare at the 2025 election, with independent Andrew Gee retaining the seat after quitting the Nationals over their opposition to the Indigenous voice to parliament.
Firebrand Northern Territory senator Jacinta Nampijinpa Price also defected to the Liberal Party following the federal election defeat.
27°C