James Cleverly has been surprisingly eliminated from the Conservative leadership race.
Kemi Badenoch and Robert Jenrick will contest the final round, with audible gasps inside the committee room as the result was announced.
Mr Cleverly, the MP for Braintree, was seen as the favourite to win the contest overall, having garnered the most votes in the first round, which saw Tom Tugendhat eliminated.
It was expected that the votes from the right of the party would be split between Ms Badenoch and Mr Jenrick, making him a near certainty to advance to the final round.
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In the fourth round of voting though Mr Cleverly took 37 votes, with Ms Badenoch leading on 42 and Mr Jenrick on 41.
Candidates entering the race needed a proposer, a seconder and eight nominations to proceed to the ballot.
The parliamentary party then narrowed the field down to four.
A series of votes by MPs then whittles that down to two candidates, who members will vote to be elected leader on November 2.
Mr Cleverly's elimination is a huge shock as he was seen as the sole remaining centrist, and took 39 votes in the previous round.
That meant he needed just two more of his fellow MPs to back him to be guaranteed to reach the final two, but he actually lost support.
It was assumed that Mr Cleverly would pick up the bulk of Mr Tugendhat's 20 backers in the last round.
Ms Badenoch, the shadow housing secretary and former trade minister, is now likely to be favourite to win.
She was the favourite with the bookmakers before the contest began, and is seen as representing the right of the party.
Ms Badenoch wrote on article earlier in the campaign declaring "not all cultures are equally valid", and has downplayed Britain's role in colonial history.
She has declared she would be ready to withdraw from the European Convention on Human Rights in order to prevent people from seeking asylum.
Mr Jenrick has also proposed withdrawing from the ECHR.
Mr Cleverly said: “I’m grateful for the support I’ve received on this campaign from colleagues, party members and the public.
"Sadly it wasn’t to be. We are all Conservatives and it’s important the Conservative Party unites to take on this catastrophic Labour Government.”
Labour Party chairwoman Ellie Reeves MP said: “After months of gaffes, wild unfunded policies and infighting, Tory members now have the unenviable task of choosing between two of the architects of Tory failure.
“Both Kemi Badenoch and Robert Jenrick are central figures in 14 years of hapless leadership and decline, and have already proven they’ve learned nothing from the mistakes that took the Conservative Party to its worst defeat in modern history.
“While the endless bickering continues, Labour is fixing the foundations and sorting out the mess that these two deeply unimpressive figures left behind.”
Tim Farron, the former leader of the Liberal Democrats, said: "Well…blimey! I think this could actually be the point when the Tory party ceases to be a movement contending for government.
"Lib Dems now have a very serious responsibility and opportunity to fill the gap. This is our moment."
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