With most of the votes counted, Ms Ardern’s liberal Labour Party was winning 49% of the vote compared with 27% for its main challenger, the conservative National Party.
National Party leader Judith Collins congratulated Ms Ardern on the win, but said the government would need to do better to navigate the economic wreckage of the coronavirus crisis.
She said: "To Prime Minister Jacinda Ardern, who I have phoned, congratulations on your result. Which has been an outstanding result."
In her first public address of her second term, Ms Ardern thanked voters "who trusted us to continue with leading New Zealand's recovery."
She said: “This has not been an ordinary election, and it’s not an ordinary time.
“It’s been full of uncertainty and anxiety, and we set out to be an antidote to that.
“We are living in an increasingly polarised world, a place where, more and more, people have lost the ability to see one another’s point of view,” she said.
“I think in this election, New Zealanders have shown that this is not who we are.”
Addressing hundreds of cheering supporters in Auckland, Ms Ardern said her party had gotten more support from New Zealanders that at any time in at least 50 years.
She added: "Thank you to the people who worked so hard to share our message. Who volunteered in what felt like an endless campaign.
"And to those amongst you who may not have supported Labour before - and the results tell me there were a few of you - to you I say thank you.
"We will not take your support for granted. And I can promise you we will be a party that governs for every New Zealander."
It remains to be confirmed whether her campaign has secured her an outright majority in parliament which has not happened since New Zealand implemented a proportional voting system 24 years ago.
Typically, parties must form alliances to govern, but this time there is a chance Ms Ardern and Labour will be able to go it alone.
A record number of voters cast early ballots in the two weeks leading up to the election.
On the campaign trail, Ms Ardern has been greeted like a rock star by people who have crammed into shopping malls and spilled onto streets to cheer her on and get selfies with her.
Her popularity soared earlier this year after she led a successful effort to stamp out the coronavirus.
There is currently no community spread of the virus in the nation of five million and people are no longer required to wear masks or socially distance.
The 40-year-old prime minister won the top job after the 2017 election when Labour formed an alliance with two other parties.
The following year, Ms Ardern became only the second world leader to give birth while in office.
She became a role model for working mothers around the world, many of whom saw her as a counterpoint to US president Donald Trump.
And she was praised for her handling of last year’s attack on two Christchurch mosques, when a white supremacist gunned down 51 Muslim worshippers.
She moved quickly to pass new laws banning the deadliest types of semi-automatic weapons.
In late March this year, when only about 100 people had tested positive for Covid-19, Ms Ardern and her health officials put New Zealand into a strict lockdown with a motto of “go hard and go early”.
She shut the borders and outlined an ambitious goal of eliminating the virus entirely rather than just trying to control its spread.
With New Zealand having the advantage of being an isolated island nation, the strategy worked.
New Zealand eliminated community transmission for 102 days before a new cluster was discovered in August in Auckland.
Ms Ardern swiftly imposed a second lockdown in Auckland and the new outbreak faded away. The only new cases found recently have been among returning travellers, who are in quarantine.
The Auckland outbreak also prompted Ms Ardern to postpone the election by a month and helped increase the early voter turnout.