0410 GMT March 19, 2018
Lawmakers in Berlin's glass-domed Reichstag voted 364-315 with nine abstentions for Merkel, who was then formally appointed by President Frank-Walter Steinmeier before taking the oath of office, AFP reported.
The outcome of the secret ballot suggested 35 lawmakers of her new right-left coalition bloc voted against Merkel, giving her a thin nine-vote margin that opposition parties were quick to label a "rocky start" for a spent and joyless governing alliance.
Merkel nevertheless beamed with joy and relief as applause filled the Bundestag chamber, where her scientist husband Joachim Sauer and her 89-year-old mother Herlind Kasner were among the well-wishers.
For the veteran leader, the ceremony marked the end of a painful stretch of post-election paralysis, the deepest crisis of her 12-year career.
A right-wing populist rise in September elections weakened all mainstream parties and deprived Merkel of a majority, forcing her into another unhappy alliance with the center-left Social Democratic Party (SPD).
The grand coalition, mockingly dubbed a "GroKo" in German, didn't start as a "love marriage", her designated vice chancellor and finance minister, the SPD's Olaf Scholz, drily observed this week.
All coalition partners have nonetheless sought to allay fears that their marriage of convenience could break up mid-term, insisting they plan to jointly govern until 2021.
The SPD has wrested both the trophy posts of finance and foreign affairs in Merkel’s new cabinet to the dismay of a growing band of critics within her Christian Democratic Union (CDU).
To quieten the dissent, Merkel has named a sometimes outspoken critic, Jens Spahn, 37, as her new health minister and recently tapped a potential successor, new CDU general secretary Annegret Kramp-Karrenbauer.
On Friday Merkel will head to Paris to discuss EU reform plans with French President Emmanuel Macron ahead of a March 22-23 summit, after a lengthy stretch in which Berlin was hamstrung on the European and world stage.
Macron warned in the Frankfurter Allgemeine Zeitung daily that, without Germany on board, "part of my project would be doomed to failure".
Merkel's incoming coalition has broadly welcomed Macron's bold reform plans, meant to reinvigorate the bloc and counter extremists and populists who have made major gains in Western democracies.
She has argued that the EU must increasingly look after its own interests in the era of US President Donald Trump, who has questioned long-standing transatlantic defense ties and threatened a trade war.
Berlin advocates closer EU cooperation on defense, immigration and plans for a European Monetary Fund. But it is lukewarm on the idea of a joint eurozone finance minister and rejects any pooling of debt.
The rise of populist fringe parties is also the central domestic threat for Merkel's new coalition, which faces the far-right Alternative for Germany (AfD) as the biggest opposition party.
The AfD scored almost 13 percent in the election, capitalizing on public fears over a mass influx of more than one million refugees and migrants since 2015 and angrily demanding that "Merkel must go".