But many SPD members and politicians remain unhappy with their party's involvement in the new coalition. Merkel was elected by deputies from her own conservative CDU-CSU and her junior coalition partners, the Social Democratic Party (SPD). Free Democratic Party (FDP) leader Christian Lindner, who triggered the collapse of earlier "Jamaica" coalition negotiations, described Wednesday's vote as constituting a "loss of authority" for the chancellor.
Merkel will travel to Paris on Friday for talks with French President Emmanuel Macron on the first trip overseas of her new term.
Ms Merkel is due to be sworn on Wednesday.
"We are living through a period of change that will probably transform the world as much as the shift from an agrarian to an industrial society", Merkel has said. "There has been a lot of criticism of her, but people have time and again underestimated Merkel and predicted her imminent demise".
There were 315 votes against her re-election and nine abstentions.
The leadership of the SPD had initially ruled out joining Merkel in the government in the wake of historically disappointing results at federal elections in September past year.
"I accept the vote", CNN quoted Merkel to have told the lower house of parliament after the vote.More news: Putin: Jews, Ukrainians 'with Russian citizenship' could be behind United States election meddling
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Merkel's fourth time is expected to be her last, and will be formally appointed by President Frank-Walter Steinmeier before taking the oath of office at 1100 GMT.
Merkel's conservative CDU will, for the first time since the 1960s, take over the economy and energy ministry with her key ally and former environment minister Peter Altermaier in charge of the ministry. "It shows that the grand coalition is actually going to be a small coalition". The Social Democrats initially planned to go into opposition.
Ms Merkel is known affectionately in Gemany as "Mutti", meaning Mum.
As The Associated Press notes, Merkel faces the simultaneous challenges of managing a potential trade war with the US, finding "common ground with France and others on shaping the European Union's future", all while juggling the competing demands of a "fragile" coalition government.
The 63-year-old has dominated Germany's political landscape for years and is Europe's longest-serving leader.
The AfD scored nearly 13 percent in the election, capitalising on public fears over a mass influx of more than one million refugees and migrants since 2015 and angrily demanding that "Merkel must go".