The nation was in the mood for change and many interpreted this as meaning that it was time for a Washington outsider. The Democrats reacted by nominating Georgia Governor Jimmy Carter as their candidate and some in the Republican Party believed that they too needed a Washington outsider at the top of their ticket.

These Republicans found their Washington outsider in former California Governor Ronald Reagan. Reagan was especially popular among the party's conservative wing. Reagan and many of his conservative supporters faulted Ford for failing to do more to assist South Vietnam, which had finally collapsed in April 1975 with the fall of Saigon. They also disliked him for signing the Helsinki Accords, which they interpreted as acceptance of Soviet domination over Eastern Europe. They also disliked Ford's negotiations with Panama to hand over the Panama Canal.
Reagan began to criticize Ford openly as early in the summer of 1975. That fall he formally launched his campaign. At first, it appeared that Reagan would not attract much support and that Ford would easily win the nomination. Ford narrowly defeated Reagan in the New Hampshire primary, and then beat Reagan in the Florida and Illinois primaries by larger margins. By the time of the North Carolina primary in March 1976, Reagan's campaign was nearly out of money, and it was believed that another defeat would force Reagan out of the race.
Reagan found an ally in North Carolina Senator Jesse Helms, whose organization helped Reagan to defeat Ford in the North Carolina primary. This was followed by a string of impressive victories for the Reagan campaign, including in Texas, where he carried all twenty-four congressional districts and won all ninety-six delegates at stake in the state's first binding primary. Ford bounced back to win in his home state of Michigan. From then on the two candidates engaged in an increasingly bitter contest for delegates. By the time the Republican Convention opened in August 1976, pundits said that the race was still too close to call.
The 1976 Republican National Convention took place from August 16 to August 19, 1976, and was held in Kemper Arena in Kansas City, Missouri. Going into the convention, Ford had won more primary delegates than Reagan, but Ford did not have enough delegates to secure the nomination. Ford and Reagan arrived in Kansas City before the convention hoping to convince the remaining uncommitted delegates to their cause in an effort to secure the nomination. The Texas delegation and other conservative Western and Southern delegates worked hard for Reagan to persuade delegates from other states to support their candidate. Ford used all of the perks of the Presidency to win over uncommitted delegates, including offering trips aboard Air Force One and personal meetings with the President himself.
Reagan had promised, if nominated, to name Senator Richard Schweiker of Pennsylvania as his running mate, in a bid to attract liberals and centrists in the party. This move backfired, however, as many conservatives, including Senator Jesse Helms, were put off by Reagan's choice of the "liberal" Schweiker. Only a few moderate delegates switched to Reagan. Helms promptly began a movement to draft Conservative Senator James L. Buckley of New York as the presidential nominee.
Reagan's managers proposed a rules change that would have required Ford to publicly announce his running mate before the presidential balloting. They hoped that when Ford announced his choice of running mate, it would anger one of the two factions of the party and help Reagan. The proposed rules change was defeated by a vote of 1180 to 1069, and Ford gained momentum as a result.
These results were very close to the final results of the first ballot for the party's nominee for president. Ford won the nomination with 1187 votes to 1070 votes for Reagan. Conservatives succeeded in inserting several key planks into the party platform, including a "Human Life Amendment to the Constitution", which the conservatives wanted in response to the 1973 US Supreme Court decision of Roe v. Wade. But they did not get their candidate at the top of the ticket.
Ford chose Senator Robert Dole of Kansas as his running mate. After giving his acceptance speech, Ford asked Reagan to come and say a few words to the convention. Reagan proceeded to give a very eloquent address which overshadowed Ford's acceptance speech.

The battle for the nomination injured Ford in his bid for re-election, though likely not as much as his pardon of Nixon. Ford managed to close the remaining gap in the polls and by election day the race was judged to be even. On election day it took most of that night and the following morning to determine the winner. It wasn't until 3:30 am EST that NBC pronounced Carter the winner. Carter defeated Ford by two percentage points in the national popular vote. The electoral vote was the closest since 1916. Carter carried 23 states with 297 electoral votes, while Ford won 27 states and 240 electoral votes.