Her convincing runoff victory over Rep. Gresham Barrett—she had 65 percent to his 35 percent with virtually all the votes counted — makes her the first woman to win either party’s nomination for the state’s top job. South Carolina’s conservative heritage and the mood of voters this year means she is the frontrunner in November’s general election against Democratic state Sen. Vincent Sheheen - and a win would make her South Carolina’s first woman governor.

“This is a great night for the thousands of people across this state who believed in this underdog campaign and the message of reform,” Haley said her victory rally in Columbia, S.C., where she spoke from a stage set in front of a state history museum room that displays artifacts from the Confederacy. “But this is a really great night because South Carolina just showed the rest of the country what we’re made of.”

Her win guarantees the race a national spotlight and even more cash and attention from 2012 hopefuls looking for her support in a key early presidential primary—and hoping to boost a young, Indian-American leader who can help expand a party that has long struggled to find a way to win over young and non-white voters.

Katon Dawson, the former chair of the South Carolina GOP and a key mover in the party’s effort to recruit more diverse candidates, said Haley’s victory marks “a historic moment not just for South Carolina, but for the Republican Party.”

“We are seeing first hand somebody break the glass ceiling in our state,” former South Carolina First Lady Jenny Sanford told POLITICO. Sanford, the ex-wife of disgraced Gov. Mark Sanford, has been a staunch Haley ally whom aides privately say made a huge difference to the campaign. “The political class here has long since ignored the strides Mark Sanford made when he was elected with big margins and what he was elected about… Nikki’s election is a continuation of that and by gosh I think it’s time for a woman to make it happen,” she said.

Her ex-husband, whom she divorced after he disappeared from state government to visit his Argentine mistress last summer, also appeared at Haley’s victory rally.

In her victory speech, Haley recalled asking Sanford if he thought South Carolina was ready for a female governor. “‘I don’t know about that, but they’re ready for you,’” she recounted Sanford saying.

“The fact that you have a woman, the fact that you have somebody of foreign ancestry says everything about the modern South Carolina today,” the governor told POLITICO in an interview.
Indeed, the tableau at Haley’s election night party illustrated the New South moment — as she declared victory, her beaming male relatives stood just off-stage wearing turbans in the Sikh tradition.

The win is the culmination of a down-and-dirty campaign that exploded in its last month after former Alaska Gov. Sarah Palin appeared with Jenny Sanford to endorse Haley in mid-May. Haley shot to the top of a crowded field she’d been trailing for months, and an avalanche of accusations followed—there were two separate allegations of marital infidelity and a nasty ethnic slur from a longtime state lawmaker.

The two-week runoff featured a whisper campaign challenging Haley’s Christian credentials and last-minute revelations that an engineering firm paid her more than $40,000 for consulting work while she was serving as a member of the state legislature.

She won anyway.

“This is a state that has long since been known for its negative politics and the politics of personal destruction,” Jenny Sanford said Tuesday night. “It’s about time that the political class realized that those politics won’t work anymore. And what we really need, we have real issues in our state that need to be addressed.”

Alluding to the affair allegations, Dawson added: “South Carolina Republicans have seen through the smokescreen of the political consultant class.”

Still, Democrats are likely to try to tie Haley to Mark Sanford’s history, both personal and political, especially considering the affair allegations.

Mark Sanford suggested voters would differentiate between the stain left by his extra-martial affair and his policy record over two terms. “I think we’ve long gotten over my legacy, I think we took care of that last year,” Sanford said.

Asked if he’d support Haley’s general election campaign, he said: “It’s her campaign and she’s run a brilliant one and if we can be of help, we’d love to. Her team will decide that.”

She’ll definitely have help from the national GOP establishment. Former Massachusetts Gov. Mitt Romney donated $42,000 to her runoff campaign and she’s had ongoing support from Palin and key Beltway players.

“Nikki Haley’s historic victory in South Carolina is a testament to her hard work, perseverance and determination. Her success ushers in a new era of South Carolina politics, and represents a growing new generation of Republican leaders from across the country,” Republican Governors’ Association executive director Nick Ayers said in a statement.

Still, Democrats are confident they have a top-notch candidate in Sheheen, who won a decisive 59 percent of the vote in the primary two weeks ago and avoided a runoff. He also has a family history in South Carolina politics. His uncle, Bob Sheheen, was the last Democrat to be speaker of the state House, and his father, Fred Sheheen, headed the state Commission on Higher Education.

Democratic observers in South Carolina say Sheheen is unlikely to go negative in traditional South Carolina fashion—and he could have an inroad with moderate Republicans nervous about a continuation of Sanford’s conservative legacy.

“National Republicans desperate for a new rising star are prematurely attaching their hopes to Nikki Haley, who has moved so far outside the mainstream that she’s damaged her general election hopes,” Democratic Governors’ Association Nathan Daschle said in a statement.

Still, he acknowledged Sheheen is the underdog: “This will be a race to watch in the fall,” he said.

Jonathan Martin contributed to this story from Columbia, S.C.