Barak, 65, emerged six percentage points ahead of his main rival, lawmaker Ami Ayalon, a former navy commander and ex-chief of the General Security Service (Shabak).
Barak, who has a brilliant military career behind him, will replace former Labor leader, Amir Peretz, who quit the race in the first round two weeks ago.
The Labor Party has the second largest faction in the Knesset, parliament, and holds four ministerial portfolios.
During Barak's premiership in 1999-2001, Israel left southern Lebanon and stepped up peace talks with Palestinians when Barak assumed an excessively soft position, as critics said at the time. After quitting the post, Barak took up a business career, which was extremely successful.
Barak, also a former interior and foreign minister, has already addressed his colleagues in the Labor Party, the main coalition partner of ruling Kadima.
In his address to the party, Barak, who is expected to seek defense minister's portfolio, promised to focus on strengthening defense capabilities in the country. "I will apply all my energy and knowledge to consolidate the ... army," he said.
