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From americanpresident.org:
Three days after the embassy takeover in Iran, Senator Edward Kennedy of Massachusetts announced his candidacy for the Democratic presidential nomination. Incumbents rarely face a challenge from within their own party, but Kennedy was encouraged by Carter's weak poll ratings. When told of the Kennedy challenge, Carter snapped to reporters: "I'll whip his ass."
Kennedy came close to defeating Carter as the party split into two wings. The day after the president lost the New York primary, a tabloid headline brayed, "Big Apple to Carter: Get Smarter!" The president limped into that summer's convention weakened by the troubles at home and abroad, but he did have more delegates than Kennedy, and if they stuck to their pledges to vote for him, he would win the nomination. Kennedy desperately tried to get the convention to repeal the system of pledged delegates, arguing that if delegates could vote freely, they would dump Carter. But the convention refused to change its rules and Carter won renomination. To get Kennedy's endorsement Carter was forced to make many policy concessions to the liberal senator. Much of the Democratic platform reflected Kennedy's views, and some of it was an outright repudiation of the Carter record.
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