Jorge Mario Bergoglio, Archbishop of Buenos Aires, was announced soon after as the 266th Pope. He will be Pope Francis.
He ushers in a new era as the first Pope from the Americas.
Addressing the crowds from the balcony of St Peter's Basilica, Pope Francis asked the Catholic faithful to pray for him.
"Good evening," he said. "You know that the duty of the conclave was to provide Rome with a bishop. It looks as if my brothers, the cardinal, went to the ends of the world. I would like to thank you for your welcome. Thank you. Above all, I would like to pray for Benedict XVI. Let's pray altogether for him so that God can bless him and the Madonna looks after him."
The white smoke was greeted by cheers from the crowds in St Peter's Square watching on the giant TV screen.
"I can't explain how happy I am right now," Filipino Ben Canete told the Associated Press.
The selection was made during the second day of the conclave which brought together 115 Cardinal Electors for the secret vote in the Sistine Chapel.
Pope Francis' first tweet as Pope was: "Immensely happy to be the new Pope, Francis I"
According to Vatican Radio, white smoke appeared from the chimney at 7:06pm on Wednesday.
Pope Francis, 76, succeeds Benedict XVI who stepped down last month because he felt he did not have the physical strength required for the demanding role.
The election of a new Pope requires a two-thirds majority among the Cardinal-Electors, meaning that the new Pope received the vote of at least 77.