Handed the two weighty portfolios of employment and education after Rudd's 2007 landslide election, she has overseen a generous spending programme for schools and the winding back of the previous government's loathed labour laws.
Her handling of A$16bn ($13.9bn) worth of stimulus spending on school buildings was attacked by the opposition, though that did not seem to dent her popularity with voters or within her ruling Labor party.
She was also a member of the government's so-called four-person "kitchen cabinet", at the centre of policy and strategic direction.
And while Rudd's once record popularity levels have plummeted, the Australian electorate has warmed to Gillard.
Born on September 29, 1961 in Barry, Wales, Gillard's family migrated to Australia in 1966.
"I became involved [in politics] in order to pursue what I thought was a vision of a better country"
Julia Gillard, new Australian prime minister
She studied arts and law in Adelaide and became the president of the Australian Union of Students in 1983.
Gillard forged a career in industrial relations law, becoming a partner with Slater and Gordon in 1990, before edging into politics as chief of staff to then Victoria state's opposition leader John Brumby.
After initially being rejected by the party for a parliamentary seat, she went to parliament in 1998 after winning the safe seat of Lalor in Melbourne.
Gillard, who has no children, is widely respected and comments from a conservative politician in 2007 that she was unqualified to run the country because she was "deliberately barren" prompted a national outcry.
Modern Australian women understood they had choices and such comments were irrelevant, she said at the time.
|Rudd, left, made way for his deputy after losing the support of his party [EPA]
She discussed the issue of children during an interview in 2008, saying she was "full of admiration for women who can mix it together, working and having kids, but I'm not sure I could have".
"There's something in me that's focused and single-minded and if I was going to do that [have a family], I'm not sure I could have done this [have a political career]," she told the ABC.
Gillard became the country's most powerful female when she became deputy leader to Rudd in 2007 but insisted she was not in politics to become the "first woman to do something".
"I became involved in order to pursue what I thought was a vision of a better country," she said at the time.
The change in leadership is not expected to bring any major change in policy direction for the Australian government.