The sprawling southern NSW electorate was most recently held by former Liberal leader Sussan Ley for a quarter of a century before her resignation upon being ousted by Angus Taylor in February.
While the Liberals and Nationals both put forward a candidate, the race was truly between One Nation's David Farley and independent Michelle Milthorpe.
Labor chose not to contest the by-election.
In the end Mr Farley steamrolled ahead to claim 59 per cent of the two-candidate-preferred vote.
He told a room of supporters he was humbled by the result.
"We're like a mason with a chisel and a hammer and we're re-carving the letters into the Australian democracy," he declared on Saturday night to a room that erupted in cheers and applause.
"One Nation has reached the end of its beginning, we're going through the ceiling from here."
Farrer comprises more than 126,560 square kilometres and fills out the southwestern corner of NSW.
Its largest population centre is Albury, which sits on the NSW border with Victoria in the south.
The race has been viewed as an electoral test of support for Pauline Hanson's populist One Nation party, which has now won its first lower-house seat.
Mr Farley's win is widely viewed as trouble for the coalition as it continues to lose votes to the alternative conservative party.
"We have to take away some hard lessons from this and what we have seen since the last (federal) election and from the last election," Mr Taylor said.
"For too long, we have been a party of convenience and not of conviction."
But the race coming down to candidates from a minor party and an independent also signals a broader shift in voting patterns relevant to the Labor Party as much as the Liberals.Â
In the 1960s, more than 70 per cent of Australians would vote for the same party in each election.
By 2025, that number fell to just one in three, according to the Australian Election Study.
"The Australian electorate has become increasingly volatile," the study's chief investigator, Griffith University senior lecturer Sarah Cameron, told AAP.
"Most people aren't feeling close to the major political parties and they're increasingly willing to switch votes from election to election."
So far, the exodus was being felt more on the conservative side of politics but the pattern tended to align with periods of infighting and leadership spills.
"Labor is in a slightly better position than the Liberals at the moment, their record lows came after the Rudd-Gillard-Rudd years," Dr Cameron said.
"The current unpopularity of the Liberal party reflects people's dissatisfaction when parties are seen as infighting rather than representing the interests of voters."
Senator Hanson also had a message for the Liberals, Nationals and Labor.
"This is a journey we're going to go on, we're going to look forward to the future," she said on Saturday night.
"The people out there who may be watching this: we're coming after those other seats."
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