Malcolm Turnbull has retained the Liberal leadership after starring down a challenge from chief dissenter Peter Dutton.

The Prime Minister declared the leadership vacant in a party room meeting, calling on any challenges to come forward.

Home Affairs Minister Peter Dutton put his hand up, prompting a vote. Mr Dutton failed in his attempt as the room voted 48 – 35 in favour of Mr Turnbull.

Mr Dutton has resigned from his position as Home Affairs Minister and will remain on the backbench.

Scott Morrison has been appointed acting Home Affairs Minister.

@ScottMorrisonMP will take over Home Affairs portfolio @2GB873 @3AW693 @NewsTalk4BC @6PR @1395FIVEaa #auspol

— Roshai Murdoch (@roshaimurdoch) August 21, 2018

Facing the media after seeing off the challenge, the PM says the Liberal party has “confirmed” his leadership.

“Australians expect us to be focused on them… they don’t like us being focused on ourselves or talking about each other.

“We know that this disunity undermines the ability of any government to gets its job done. Unity is absolutely critical.

“We cannot allow, as I said in the party room today, internal issues to undermine our work.”

As for Peter Dutton’s ministerial resignation, the Prime Minister says he “has done an outstanding job… I want to thank him for his work”.

“I have invited him to continue in that office. However, he has said to me…that he doesn’t feel he can remain in the Cabinet having challenged me for the leadership of the party, and so he is resigning.”

It’s understood Mr Dutton didn’t address the Liberal party room this morning.

BREAKING | The @LiberalAus leadership has been “declared vacant” with a vote to be held on party leader. pic.twitter.com/MqIftaWEHY

— 2GB 873 (@2GB873) August 20, 2018

The Deputy Leadership was uncontested and Foreign Affairs Minister Julie Bishop will remain in the role.

She says today “was an overwhelming vote of support for the Prime Minister”.

“We don’t take it for granted.”

“What I say to all those who didn’t vote for the Prime Minister, we now have the opportunity to focus on what the electorate want to hear from us.

Given the closeness of the result, a second challenge is now likely to be on the cards either this week or when parliament sits again in September.

Some Liberal MPs are urging their colleagues to hold their nerve.