At the end of a lengthy meeting in the true blue constituency, chaired by the broadcaster Andrew Neil, the former foreign secretary defeated three candidates to snatch the nomination on the first ballot.
Sir Malcolm, 57, joked after his victory that he had been given a tough time by Neil, who depicted him as a "carpetbagger" for abandoning Scottish politics to seek a safe English seat.
Asked whether he had been nervous at the meeting, attended by 800 local Tories, Sir Malcolm said: "Absolutely terrified. The local Conservatives wanted to put us all on our mettle and there was no mercy shown, and that is absolutely right and proper."
Sir Malcolm's emphatic victory, in which he defeated Nick Hurd, son of Douglas Hurd who was his predecessor as foreign secretary, places him in a strong position to play a key role on the Tory front bench after the next election.
Michael Howard is keen to give him a prominent cabinet post if the Tories win the next election. The presence of Sir Malcolm would mean three of the senior ministers in John Major's cabinet would be in the Tory front line.
Ken Clarke, former chancellor, completes the line-up as a member of Mr Howard's panel of "wise men". Sir Malcolm attempted last night to depict himself as a local candidate.
"I see it as a priority to be seen over the next few months as a very strong local figure working in this community."
Despite his attempts to play down his prospects, Sir Malcolm is likely to be seen as a future Tory leader. He is five years younger than Mr Howard and would be an obvious successor if the Tory leader loses the next election.
Sir Malcolm's victory last night was a particularly sweet moment for the former cabinet minister who has struggled to return to parliament since losing his Edinburgh Pentlands seat in Labour's 1997 landslide.
Spurning the offer of a peerage from Mr Major, he unsuccessfully contested his old seat again in 2001.
The Tories finally won the seat in the last Scottish parliamentary elections. By then, however, Sir Malcolm had the perfect excuse to head south. He told last night's meeting that Edinburgh Pentlands is due to disappear as a Westminster seat under boundary changes ahead of the next election.
