It was the first time that a formal election by the parliamentary party had taken place, previous leaders having emerged through a consultation process. This procedure had fallen into disrepute following the manoeuverings over the leadership at the 1963 party conference which had led to the appointment of Douglas-Home, then a hereditary member of the House of Lords. The plans for how the election would work were published in February 1965, and agreed upon by the parliamentary party thereafter.
It was widely assumed that both Edward Heath, Shadow Chancellor, and Reginald Maudling, Shadow Foreign Secretary, would stand. Both were seen as the only credible candidates other than Iain Macleod, who ruled himself out immediately. Members of the "magic circle" of old Etonians chose not to contend the election, with widespread agreement that a younger and modern face was needed to front the Conservative Party. Other names that were seen as possible contenders were Quintin Hogg, Peter Thorneycroft and Enoch Powell, Shadow Transport Minister (who eventually did stand). Some were angered by Powell's candidature, as a complication in an otherwise clear contest.
Maudling, the most experienced and publicly known of the candidates, was generally considered to be the favourite. Heath's prospects were seen as either tie-ing or preventing Maudling from reaching the 173 votes needed to win outright. It was also thought that Powell would take support away from Heath whose backers predominantly came from northern England and industrial cities (such as Birmingham and Wolverhampton), as opposed to Maudling's geographically wider support. Heath, however, fought a more effective leadership campaign, organised by his young lieutenant Peter Walker, and by the eve of the election, the Heath camp believed they had a clear lead.
The rules in place required the victor to have both an absolute majority (which Heath had narrowly achieved) and, in the first ballot, at least a 15% lead of votes actually cast (not counting abstaining members - this would be changed in the mid 1970s review of the rules). As Heath had not achieved the latter hurdle, the election could therefore have gone to further rounds. However Maudling conceded defeat and Heath was duly declared leader.
Powell had not expected to win, but said he had "left his calling card", i.e. publicly demonstrated himself to be a potential future leader. In 1968 he was sacked from the Conservative front bench for the "Rivers of Blood speech", although he held great sway over public opinion in the following years. However, by the next time the leadership fell vacant in 1975 he had become an Ulster Unionist and so was no longer eligible to stand.