Kevin Rudd has prevailed in a dramatic Labor leadership ballot, defeating Julia Gillard and paving the way for him to return to the prime ministership.

Labor caucus returning officer Chris Hayes informed the nation that Mr Rudd won the leadership ballot 57-45.

Rudd wins key points Key points Kevin Rudd defeats Julia Gillard 57-45 in leadership ballot.

Caucus elects Anthony Albanese new deputy PM, after Wayne Swan stands down.

Penny Wong elected unanimously as Senate Leader, after Stephen Conroy resigns.

Greg Combet, Peter Garrett, Joe Ludwig and Craig Emerson have also quit Cabinet.

Ms Gillard says she has written to Governor-General Quentin Bryce, asking her to commission Mr Rudd as PM.

But his return has triggered an avalanche of departures from not only Labor's frontbench, but from their side of the Parliament.

The ballot means Ms Gillard - Australia's first female prime minister - will quit politics at the next election, following her vow to retire if she lost.

Her most loyal supporter, Trade Minister Craig Emerson, and another solid backer School Education Minister Peter Garrett will also leave parliament.

Treasurer Wayne Swan, Communications Minister Stephen Conroy, Agriculture Minister Joe Ludwig and Climate Change Minister Greg Combet have all announced they will move to the backbench.

More ministers are expected to step down.

Mr Rudd thanked Ms Gillard for her work as prime minister, praising her as a "woman of extraordinary intelligence, great strength, and great energy".

"She has been a remarkable reformer," he said.

Mr Rudd vowed to take the fight to Opposition Leader Tony Abbott in the upcoming election.

"In 2007, the Australian people elected me to be their PM. That is a task that I resume today with humility, with honour, and with an important sense of energy and purpose," he said.

"In recent years, politics has failed the Australian people. There has just been too much negativity all round. There has been an erosion of trust - negative, destructive personal politics has done much to bring dishonour to our parliament but done nothing to address the urgent challenges facing our nation, our community, our families.

"Why am I taking on this challenge? For me it's pretty basic, it's pretty clear. I simply do not have it in my nature to stand idly by and to allow an Abbott government to come to power in this country by default."

An emotional Ms Gillard earlier called on the party to "put its divisions behind us".

"I understand that at the caucus meeting today, the pressure finally got too great for many of my colleagues," she said.

"I respect that. And I respect the decision that they have made.

"But I do say to my caucus colleagues: don't lack the guts, don't lack the fortitude, don't lack the resilience to go out there with our Labor agenda and to win this election.

"I know that it can be done. And I also say to my caucus colleagues that that will best be done by us putting the divisions of the past behind us, and uniting as a political party, making sure we put our best face forward at the forthcoming election campaign, and in the years beyond."

Mr Swan says it has been a privilege to serve with Ms Gillard.

"She is one of the toughest warriors that have ever led the Australian Labor Party," he said.

"I think she's done more as a politician for our country in three years than many other politicians could ever hope to achieve."

Mr Abbott said once again the "powerbrokers of the Labor Party" had decided who would be the nation's prime minister.

He said he wants the federal election held "as soon as possible".

"It was really quite odd that Mr Rudd didn't confirm the former prime minister's chosen election date or indeed announce an earlier date, which I think would have been something of integrity but that's not what we got from Mr Rudd tonight," he said.

Caucus elects Anthony Albanese as deputy PM

After the leadership ballot, the caucus elected Anthony Albanese as the new deputy prime minister over party elder Simon Crean, 61 votes to 38, with three informal ballots.

Penny Wong was voted in unanimously to replace Mr Conroy as the party's Senate leader, with Jacinta Collins elected deputy Senate leader.

Deputy prime minister-elect Anthony Albanese paid tribute to Ms Gillard and Mr Swan but said the new team would do "great things for the nation".

"And I believe we have this evening maximised our chances of going into a third term and beyond of a Labor government," he said.

Ms Gillard says she will stand by her pledge to resign from politics following the ballot loss.

"In accordance with the pledge I gave earlier today I announce that I will not recontest the federal electorate of Lawler at the forth coming election," she said.

"I will have time in the coming weeks to be back home in my electorate to say hello and goodbye to the community that I've had the absolute privilege of representing in this Parliament since 1998."

The leadership ballot was brought on by Ms Gillard after supporters of Mr Rudd began circulating a petition earlier today to force a caucus vote.

It was the third leadership showdown between the two since Ms Gillard secured government in 2010.

Mr Rudd's victory has set the stage for an unprecedented constitutional situation.

It is not yet clear if he can secure the crossbench votes needed to maintain Labor's tenuous hold on power.

However, Ms Gillard says she has written to Governor-General Quentin Bryce asking her to commission Mr Rudd as prime minister.

The Governor-General must be assured he has the confidence of the House before swearing him in.

Tasmanian independent Andrew Wilkie and Queensland MP Bob Katter have both said they would support a Rudd government.

The Greens want his leadership tested either through an early election or on the floor of the House via a motion of no-confidence - but they would be likely to support Labor in any such motion.

Key Gillard supporter Bill Shorten switches at last minute

Mr Rudd's victory was virtually secured when right faction powerbroker Bill Shorten announced half an hour before the meeting that he had defected to the Rudd camp.

It is a stunning turnaround Mr Shorten, who played a pivotal role in the ouster of Mr Rudd and the rise of Ms Gillard three years ago - almost to the day.

Last week he said he would continue to support Ms Gillard and did not believe there would be a change of leaders.

"It is my personal conviction that the best interests of the Australian nation and the Labor party must come first, not debates about factions and personalities," Mr Shorten said.

"I believe that Kevin Rudd being elected tonight provides the best platform for Labor to be competitive at the next election."

Ms Gillard's leadership had come under sustained and intense pressure in recent days as entrenched poor polling pointed to an historic loss for the ALP at the September 14 election.

As she called the ballot this evening, Ms Gillard set the stunning condition that the defeated candidate must quit politics.

"Anybody who enters the ballot tonight should do it on the following conditions: that if you win you're Labor leader; that if you lose you retire from politics," she said.

Ms Gillard, who was Australia's first female Prime Minister has held the Victorian seat of Lalor since 1998.

She pointed to Labor's changes to the health and education systems, the national disability insurance scheme and the royal commission into institutional child abuse as her proudest achievements as the nation's 27th Prime Minister.

Ms Gillard also addressed the impact of her gender on the Government and Labor's fortunes.

"It doesn't explain everything, it doesn't explain nothing, it explains some things," she said.

"And it is for the nation to think in a sophisticated way about those shades of grey.

"What I am absolutely confident of is it will be easier for the next woman and the woman after that and the woman after that. And I'm proud of that."