Bolton, a former police officer who also served in the army, is the fourth leader of UKIP in just over a year. Diane James was elected as Mr Farage's successor but quit after 18 days, to be replaced by Paul Nuttall, in November, who vowed to win votes from Labour.
Based in Folkestone, the former soldier and police officer was considered to be a front-runner in the contest and had seen the odds on him winning fall dramatically in recent weeks.
He had challenged the decision to allow far-right candidate Waters to stand saying Ukip was in danger of becoming the "UK Nazi party".
After the result of the election released at the party's annual conference, Bolton issued a plea urging the members to rally around the party.
In a sign of UKIP's difficulties, it took Mr Bolton just 3,874 votes to win the leadership election.
"Brexit is our core task".
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"If you look at the things I've done, you'll see a certain degree of endurance there, both physical, emotional and political", he said.
Mr Bolton did, however, signal he could be the latest in a long line of Ukip leaders to act as a scourge of liberals.
Bolton distanced himself from the anti-Islam direction advocated by Waters and to a lesser extent by the early favourite, Peter Whittle, who finished a surprise fifth in the contest.
Asked if he would "ban the burka", Mr Bolton said: "I don't think it's about banning the burka, is it?"
Henry Bolton has been named as the successor to Paul Nuttall as the new leader of UKIP.
"I would call on all of you, whether you voted for me or not, to please rally around the party and be united because without being united, we can not lead and hold the government to account and achieve our core goal".
After exactly three years as leader, Mr Farage resigned to fight the Buckingham seat of Commons Speaker John Bercow at the 2010 election, subsequently coming third with 17 per cent of the vote.