And it saved Ukip, whose support evaporated in the June general election, from the total collapse that would have been triggered by a Waters victory. He promised to keep Ukip at the forefront of the Brexit debate, but said it needed to expand its focus.
Not all senior Ukip figures are thrilled by the rise of Bolton, or convinced he has the charisma and personality to turn the party around, with one predicting that, while Waters would destroy the party quickly, Bolton would bring "a slow death".
Ukip stepped back from picking Anne Marie Waters, a notorious anti-Islam activist, as its new leader, saving the party from a threatened mass walk-out.
Bolton, 54, is a former police officer and served in the army.
A banner was superimposed with an image of Mr Farage posing as Adolf Hitler with the European Union logo in the background.
Speaking immediately after the announcement, Bolton said pressuring Theresa May's government into a hard Brexit will be UKIP's "core task" under his stewardship.
"We want to be a confident and optimistic nation and we want to be a nation that is proud to be called British".
Mr Goldsmith died soon after the 1997 election, creating political space for Ukip after his Referendum Party was dissolved. There is an issue to be discussed. "I absolutely abhor the rhetoric that says we are at war with Islam, or anything that indicates such", he said.
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Amid reports that 18 of its 20 MEPs would tear up their membership if she won, Farage had warned Ukip that would be "finished" if it became anti-Islam.
Bolton's victory was a shock to nearly all in attendance at the announcement in Torquay. "And the only way I could really find anything out was by joining one of them, and I wasn't going to join the Conservatives or the Labour Party and it was a simple case of going for the one in the middle, which was the Liberal Democrats".
Ms Waters came second in the leadership contest, with 21.3% of the 12,915 votes cast.
Reacting to the news, UKIP MEP David Coburn tweeted: "Congrats to Henry Bolton thank God the terrible @AMDWaters or ghastly @prwhittle didn't win".
Why is Ukip on its fourth leader in just over a year?
It also used anti-Turkey slogans in its campaigns.
Earlier on Friday, the party revealed its new logo, which people quickly pointed out closely resembles the logo of the Barclays Premier League.
Asked at a press conference after the result was announced whether this made him an "establishment mole", Bolton said his background made him ready for the job.
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