Arthur Mutambara was elected unopposed at a meeting of 3,000 of the faction's supporters in the city of Bulawayo.
Mr Mutambara led student protests against state corruption in the 1980s. He returned to Zimbabwe recently after being in South Africa for 15 years.
The MDC split has weakened opposition to President Mugabe, observers say.....
He is a member of the majority Shona ethnic group - seen by many analysts as essential for any party leader.
Mr. Tsvangirai's MDC faction will hold its own party leadership congress in mid-March.
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