Bank Hall ward’s Coun. Afrasiab Anwar was chosen by his colleagues to succeed Coun. Mark Townsend in the post at a meeting on Tuesday night.
Queensgate’s Coun. Sue Graham was selected as his deputy.
The appointment of the 41-year-old married father-of-one follows Labour losing four councillors in last week’s local elections, and Coun. Townsend standing down to become borough Mayor.
The poll result left the Labour group as the largest party after six months in control of the council but well short of a majority.
Talks between the parties started at the weekend over the shape of the future administration for the borough.
School support worker Coun. Anwar, who had held the environment brief, said: “It was a proud moment for me to become leader of the Labour group.
“It is a big task with big challenges.
“Labour now has to go out and engage with voters and reconnect with them.
“The important thing is to ensure the stability of the borough.
“I need to catch up with the talks between the other parties and see where we go from here. Who we can work in partnership with and if we can form a minority administration again.”
Coun. Townsend said: “He will make an excellent council leader if he gets the opportunity.”