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Hassan Sheikh Mohamud, a political newcomer, won the election against outgoing President Sheik Sharif Sheikh Ahmed by the legislative vote of 190 to 79, according to Parliament Speaker Mohamed Osman Jawari.
Ahmed conceded defeat.
"I am happy to see the first free and fair election happen in Somalia after 40 years, "Ahmed said. "I want to congratulate the new president for the fair election, and I want to declare that I am fully satisfied with the results."
Mohamud thanked the new parliament for electing him as the nation's leader and asked the Somali people to collaborate with him to restore the country.
Last year, he founded a new political party in Somalia named Peace and Development. Before that he taught locally as a professor, including at the Somali Institute of Management and Administration Development, which he helped found in 1999 to train administrators and technicians to help rebuild Somalia.
Analysts said the Somali lawmakers voted for change by electing Mohamud and passing over Ahmed, whose government had faced accusations of wrongdoing.
A report released in June written for the U.N. said that his government was rife with corruption. It allegedly protected a notorious pirate leader and deposited only $3 of every $10 received into state coffers.
A report commissioned by the World Bank published in May similarly also found that 68 percent of the Transitional Federal Government's revenues in 2009-10 were unaccounted for.
Abdirashid Hashi, an analyst on the Horn of Africa with the International Crisis group think tank, described Mohamud as an outsider who nobody thought stood a chance to win.
The International Crisis Group had described the selection of Somali parliamentarians last month as undemocratic, "with unprecedented levels of political interference, corruption and intimidation."
Somali elders were tasked with naming the parliament since no election could be held, given the state of security around the country.
"Some elders allegedly nominated uneducated and objectionable individuals, some sold seats to highest bidders, and others even nominated their own family members," the International Crisis Group said.
Hashi said Mohamud's election is a move forward but that the president will need the support of his countrymen to bring change to the country.
"This is a step in the right direction, but Somalia's problems are too big for a person to solve alone," he said. They include piracy at sea, hundreds of thousands of refugees, terrorism and a lack of institutions, Hashi said.
While Somalia has had transitional administrations since 2004, it has not had a functioning central government since 1991, when warlords overthrew a longtime dictator and turned on each other, plunging the impoverished nation into chaos.
The last day of the eight-year U.N.-backed transitional government was Aug. 20, and the U.N. wanted a new president in place by then. But political bickering, violent threats and seat-buying schemes delayed progress toward the selection and seating of the 275 members of the new Parliament. A total of 269 lawmakers took part in Monday's presidential vote.
Somalia has seen much progress over the last year.
Al-Qaida-linked Al-Shabab militants, who waging an insurgency against the government, were forced out of Mogadishu in August 2011, allowing businesses to thrive and the arts and sports to return. Al-Shabab has lost control of Mogadishu and ceded power in towns in western Somalia. The militants have largely either fled to northern Somalia and Yemen, or have retreated to Kismayo, the last major town the militants control.
Last month Somali leaders endorsed a new provisional constitution that expands rights for Somali citizens.
The U.N . - which helped broker the constitution and is in charge of the poll - hopes that one day all of Somalia will be able to vote to endorse or reject the constitution.
SOURCE: ABDI GULED