It was not immediately clear if Shaw would retain his post as finance spokesman for Labor. The leadership challenge was tense at times, with both sides accusing the other of distortions.
But after the vote, Holness shook his challenger's hand and the two politicians grinned and waved to party supporters, many of them dancing to music pumping out of speakers and blowing on vuvuzela horns.
While still the governing party, Labor lawmakers unanimously chose Holness as prime minister in 2011 after Bruce Golding stepped down amid anemic public backing. Holness held the premiership for just over two months before his party lost parliamentary elections by a 2-1 margin to the People's National Party.
After that thumping, some Labor insiders began work behind the scenes to replace Holness as leader.
Shaw is the party's financial guru, even though during his tenure as finance minister a $1.27 billion loan agreement with the International Monetary Fund collapsed after a domestic debt restructuring. Earlier this year, Simpson Miller's administration negotiated another debt-swap program and loan pact with the IMF as unemployment has risen and Jamaica's currency has steadily lost value.
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David McFadden on Twitter: http://twitter.com/dmcfadd