The 66-year-old Blatter won a second four-year term with a landslide win over African candidate Issa Hayatou in a vote of the FIFA congress.
Blatter, whose reign has been dogged by allegations of corruption, polled 139 votes with Hayatou recording 56.
It comfortably pushed him past the 130 votes needed for a two-thirds majority.
Blatter immediately pledged to work to restore both his and Fifa's credibility.
He said: "Many thanks for electing me.
"You cannot imagine how this makes me feel after having been accused for months by certain people, who said I was a bad man.
"You cannot be so bad when this happens. We are all good."
He added: "Let us now forget what has happened and go forward. FIFA will be one family, united.
"We have to restore our unity then we will restore our credibility."
Hayatou believed he had 95% of African delegates' backing.
But in the end, that did not prove enough to oust Blatter.
Hayatou also had the backing of the English Football Association, whose chief executive Adam Crozier claimed Fifa's reputation was in tatters.
In a powerful speech Crozier said Fifa's credibility had been severely damaged by recent events and warned of a looming crisis in its finances.
Crozier said: "Realistically, Fifa has lost 470m Swiss francs [£215m] over the last four years. Realistically, Fifa has negative equity of 430m Swiss francs [£200m].
"One thing is certain, it is not good news and it will get worse."
Blatter's victory will almost certainly signal a shift in the power balance at the top of the world game.
Fifa general secretary Michael Zen-Ruffinen was Blatter's sternest critic and his hold on his post now becomes difficult.
That could open the door to former French international Michel Platini, who is becoming an increasingly powerful figure in Fifa.
Hayatou was gracious in defeat, promising Blatter his full support.
He said: "The verdict is there and I would like to warmly congratulate Mr Blatter who has been given your vote of confidence.
"He can count on my co-operation as has been the case in the past.
"But 59 votes is not insignificant so I want to say how satisified and relieved I am at the end of this election."