The former defence minister was elected unopposed at a party room meeting in Canberra on Monday, and will replace Scott Morrison who led the coalition to defeat at the federal election.
Former environment minister Sussan Ley was elected his deputy.
"Under my leadership, the Liberal Party will be true to our values that have seen us win successive elections over the course of the last quarter of a century," he said in his first press conference as leader.
"Make no mistake and Australians understand this, the next three years under Labor is going to be tough for the Australian people. Already they're breaking the promises and foreshadowing policy shifts. They weren't ready to govern.
"Sussan and I lead a team which has the experience to make the right calls on supporting government policies that are in our national interest and standing against those that are not in our national interests."
Ms Ley pledged to "earn back" the "trust and faith" of female voters who deserted the party at the election.
"My message to the women of Australia is we hear you," she said.
"My message is that I do know that there were women who abandoned the coalition at the last election and there were women who firmly supported us.
"I will be travelling to as many parts of Australia to speak directly to the women to hear that individual perspectives about what matters to them."
Mr Dutton said China's leadership under Xi Jinping is the "biggest issue our country will face in our lifetimes".
"That's the reality," he said.
"That's the assessment of the American, British, Japanese, Indians, and it's our assessment as well. I will support policies which help to defend our country.
"I want us to have a productive relationship with China, I want it to be restored."
Mr Dutton said he "made a mistake" walking out on the Stolen Generation apology made by former prime minister Kevin Rudd in 2008, saying he wanted to see tangible outcomes for First Nations people.
"For me, at the time, I believed that the apology should be given when the problems were resolved and the problems are not resolved," he said.
"I understand the symbolism and I made that mistake ... so I want there to be practical solutions.
"And I want to work with the government to deliver those."
The one-time policeman said he was a "strong supporter" of a national anti-corruption watchdog.
He also said he was "passionate" about climate change action but in a "sensible way".
Mr Dutton backed the housing policy the coalition took to the election, which would allow people to withdraw their superannuation to help buy a home.
"I'm not opposed to allowing Australians to achieve what is you know, a great dream and it will continue to be and it should be because it's a good investment to make and I hope that we can support that," Mr Dutton said.
Mr Morrison congratulated Mr Dutton and Ms Ley on winning the leadership positions.
"They are incredibly experienced, well versed, deeply, deeply committed Australians to both the Liberal cause and of course the cause of the nation and I think they'll do an outstanding job and I look forward to giving them all of my full support," he said.
Outgoing finance minister Simon Birmingham said David Littleproud's victory as Nationals leader brought a "freshness and vibrancy" to the coalition.
"I'm confident that we can continue ... to find that common ground," he told ABC News.
"The diversity of views and opinions that Liberal and National parties bring to this parliament are part of our strength."
Mr Dutton is the first Queenslander to lead the Liberal Party since it was founded in 1944.
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