Despite Prime Minister Scott Morrison's lobbying for a female candidate, former Australian ambassador to Israel Dave Sharma has won the Liberal Party preselection battle for the federal seat of Wentworth.

Key points: Mr Sharma was endorsed by former prime ministers Malcolm Turnbull and John Howard

Mr Sharma was endorsed by former prime ministers Malcolm Turnbull and John Howard Prime Minister Scott Morrison congratulated Mr Sharma, but said he would like to see more Liberal women in parliament

Prime Minister Scott Morrison congratulated Mr Sharma, but said he would like to see more Liberal women in parliament The by-election will be held on October 20

Mr Morrison and other party heavyweights called for a woman to take the post, and the former ambassador's election may further fracture an already under-pressure Liberal Party.

The PM tweeted to congratulate Mr Sharma, calling him "a quality guy with extensive experience and capability", but reiterated his desire to see more Liberal women in Parliament.

"The best candidate won," he tweeted.

"Of course I want to see more Liberal women in Parliament. But I always want to see the best candidate selected."

This morning he rejected suggestions the result was embarrassing for the Liberal Party given the recent focus on its lack of female representation.

"What I said was I want to see more Liberal women in Parliament, but I also want to see the best candidate. And those two issues are not contradictory," he told reporters at a joint press conference in Bronte Beach with Mr Sharma.

"Dave was the best candidate last night, and as you'll get to see, his record of service, his record of achievement, his high intellect and his ability to get the job done, I think, will serve the people of Wentworth extremely well."

Mr Sharma, who was endorsed by former prime ministers Malcolm Turnbull — whose resignation sparked the by-election — and John Howard, emerged victorious for the prized preselection after a marathon voting session that lasted more than six hours.

The ABC understands Mr Sharma took the spot with 119 votes in the final round after he and Woollahra councillor Richard Shields emerged as the final two candidates.

Liberal Party insiders said there were "201 voters".

Dave Sharma and Richard Shields were the final two left in the pre-selection battle. ( ABC News: Nick Sas )

After six rounds of voting, Mr Sharma and Mr Shields finished ahead of former Wentworth MP Peter King, former Liberal Party staffer Mary-Lou Jarvis, former Woollahra deputy mayor Katherine O'Regan, who had been the expected frontrunner.

The ABC understands there were audible gasps in room when Ms O'Regan was knocked out of the running.

But the Prime Minister insisted today the party organisation had done its job in selecting the best candidate.

"What I would have been concerned about is if the Liberal Party didn't put its best foot forward in this by-election," Mr Morrison said.

"The party organisation gets to choose the candidates, [and] the Parliament party gets to do the work when it comes to the work of policy in government and otherwise.

"So, everyone did their job last night. They picked the best candidate.

"Every candidate who put themselves forward did the right thing by putting themselves up there. The party members have made their decision and I think they've made a cracker."

Speaking after the vote outside the Eastern Suburbs Rugby Union Club entrance where the ballot was held, Mr Sharma said he would be "throwing his all" into the by-election battle.

"It's been a long evening, but I'm honoured to have been selected as the Liberal candidate," Mr Sharma said.

"We have a tough fight ahead of us to hold on to this seat, but [I] believe we can retain it, and retain a Liberal Government in Canberra."

This morning Mr Sharma told reporters he knew he had "big shoes to fill with Malcolm Turnbull".

"He's got an immense local appeal in this electorate. He did a huge amount of Wentworth, he did a huge amount for Australia. And I do want to honour him and acknowledge that debt," he said, flanked by the PM who replaced Mr Turnbull.

"With the support of the Prime Minister and other senior ministers, doing our best to keep Wentworth in Liberal hands."

Friendly rivalry

Outside the rugby club entrance before proceedings kicked off, Liberal Party heavyweights such as former attorney-general Phillip Ruddock and former Dreamworld chair Women's Weekly editor-in-chief Deborah Thomas entered the club to cast their vote.

Christine Forster, the sister of former prime minister Tony Abbott, walked in with her wife as a voting scrutineer for one of the candidates.

Ms Forster abandoned her tilt at the seat less than a week after announcing she would run, claiming her candidacy had become a "proxy for division" within the party.

Her departure came before former acting Liberal Party director Andrew Bragg, who had previously been widely considered the frontrunner for Liberal preselection, bowed out of the race on Monday, declaring the party needed to pick a woman.

Liberal councillor Christine Forster and her wife Virginia Flitcroft at Thursday night's vote. ( AAP: Brendan Esposito )

Inside, candidates chatted and joked, welcoming voters into the club.

The Eastern Suburbs Rugby Union Football Club sits smack-bang in the middle of the leafy electorate, which takes in affluent suburbs such as Paddington, Woollahra, Double Bay and Bondi.

The club itself is a fertile breeding ground for Wallaby greats, and inside the Liberal heavyweights were flanked by bemused parents of the under-15s team, who were there for their presentation night.

Some were a little confused by all the media attention. "Are we at the right place?" one parent asked.

Where to now?

Mr Sharma now faces the challenge of keeping Wentworth in Liberal hands at the by-election, with early polling indicating the seat is not as safe as the 17.7 per cent buffer from the last federal election suggests.

The loss of Mr Turnbull as the popular local member, and the events that led to his ousting as prime minister, have added another factor to the contest.

Former Wentworth MP Peter King inside the rugby club building on Thursday. ( ABC News: Nick Sas )

Signs spruiking the Labor candidate Tim Murray and Greens candidate Dominic Kanak are already plastered all over the electorate.

Wentworth is one of only two federation electorates that have never been won by Labor.

ABC election analyst Antony Green estimates Mr Turnbull's departure could automatically slash as much as 5 per cent off the margin.

The other three candidates, St Vincent's Hospital cardiologist Michael Feneley, digital media specialist Carrington Brigham and rheumatologist Maxine Szramka, were knocked out of the running early on.