Politicians voted by 364 to 315, with nine abstentions, in favour of re-electing 63-year-old Ms Merkel.
Merkel listed internal security and European cooperation among the new government's priorities, as well as new challenges such as responding to import tariffs announced by U.S. President Donald Trump.
From 1600 GMT, Merkel sits down with her new cabinet, in which the SPD has wrested both the trophy posts of finance and foreign affairs to the dismay of a growing band of critics within her Christian Democratic Union (CDU). "Now full steam ahead for Germany".
Parliament proceedings washed out for 7th day in a row
The house was scheduled to take up the key Finance Bill 2018 and Appropriations bills for FY 2017-18 and 2018-19. Some members from the Left parties, while standing at their seats, were holding some photographs.
According to a report by CNN, Merkel will first travel to the Berlin residence of German President Frank-Walter Steinmeier to be officially nominated before returning to the Bundestag to be sworn in as Chancellor later on Wednesday.
Merkel's spokesman Steffen Seibert said the German leader had condemned the attack and assured May in a telephone call that she was taking the British government's views on possible Russian involvement in the attack extremely seriously. She has also stressed the necessity of securing Germany's borders, and developing policies to mitigate the causes of migration. "If these unilateral actions can't be avoided, we will have to consider how we can answer that, but I am counting on talks, and there will be many opportunities for that".
The new "grand coalition" of Germany's biggest parties emerged after Merkel's attempt to forge an alliance with two smaller parties collapsed.