Mr Howard, who will formally resign today but will stay on until a new leader is chosen in December, rallied the Tory conference in his farewell speech with a plea for unity under his successor.
Although aides denied he was endorsing any of the five candidates, some MPs saw his references to the need to win over a new generation of voters as a hint that he wanted the party to skip a generation and elect David Cameron, whom he promoted to shadow Education Secretary after the general election.
Earlier Mr Howard appeared to cast doubt on whether David Davis, the shadow Home Secretary, has the qualities of a leader following his disappointing conference speech on Wednesday. "Inspiration needs to be part of the prescription," he said.
The outgoing Tory leader hailed this week's Blackpool conference as "truly remarkable" and "full of hope" for the party. He admitted he had been privately worried that it could be seen as divisive because it would be dominated by the leadership beauty contest.
Mr Howard said: "Let's not run down our party. Let's show we can elect a new leader without bitterness and backbiting. And then let's unite behind that new leader - not just for a year or two, but for a whole parliament, even when the going gets tough."
Mr Howard steered a middle course between right-wing traditionalists and modernisers demanding radical change who have given a frank assessment of the party's poor standing with the voters. "We must not be obsessed by talking about ourselves, to ourselves, at Westminster. We must engage with the vast majority of people who - often quite rightly - see Westminster as a remote and distant place, unconnected to the real world.
"Yes, we must change, but we are not - and never have been - a nasty party."
After two years as Tory leader, Mr Howard admitted that his best "turned out not to be good enough" after he failed to prevent a third successive election defeat.
He was unrepentant about the platform on which the party stood and his decision to play the immigration card. Attacking the "shambles" of the immigration system, he said: "We need to know who is coming into and leaving our country - that means controlling immigration.
"To me that is a statement of the blindingly obvious. It's not about shoring up some core vote. It's about protecting our country. And no one - not Tony Blair, not Charles Kennedy, not the media - should stop us from saying so."
Francis Maude, the Tory chairman, told the party that the Tories were "on the march again", but warned: "We know that just having a brilliant conference is the beginning of our renewal, not the end. We recognise that we must not slip back into a cosy comfort zone where we congratulate ourselves in ever smaller rooms about the excellence of our policies while too many modern Britons blithely ignore us."