Gillard now informs Governor-General Quentin Bryce that she is resigning as prime minister tomorrow and Rudd will be sworn in to replace her.
With the leadership ballot in her party today going against her (Rudd won by 57 to 45 votes), Gillard will quit politics after national elections due in September. Gillard had said earlier that she would retire from politics if she lost the vote and the support of her parliamentary colleagues.
The embattled Gillard called the vote after a day of intense party-room moves to depose her by her predecessor, who she ruthlessly ousted in 2010.
Facing a landslide defeat in September's election, the Labour Party went for Rudd to stem the rot.
Gillard faced personal attacks over her voice (nasal and monotone), length of her nose, choice of clothes and her figure. But Gillard's strength of character has consistently been on display despite these barbs.
As leader, she dealt with the challenges of a hung parliament and negotiated several critical legislations like carbon tax, a disability insurance scheme and, on the day she lost power, a new formula to fund government schools.
Her feisty performance in parliament in October 2012, when she described opposition leader Tony Abbott as a misogynist, won her much admiration.
Abbott may win September elections to become the prime minister and he is a person who believes that men are "more adapted to exercise authority and issue command" than women.
Hence, Julia Gillard's leadership was important for Australia. It has placed sexism on the agenda of Austrlia's public life in spite of consistent jibes at her like a menu (describing Gillard's body parts), or a radio jockey asking her about her partner (whether her partner Tim Mathieson was homosexual) or even a recent comment by a female radio announcer that Gillard showed too much cleavage.
The cleavage comment drew angry protests and Gillard's female supporters took to posting photographs of their breasts on Twitter using the hashtag "convoyofcleavage."
However, the world is still not into twitter democracy and Gillard lost vote in her party politics.