With 95 per cent of votes counted, Ms Ardern’s Labour Party were on course to gain 49 per cent of the vote, which would give it 64 seats in New Zealand 120-seat parliament.
The mandate means Ardern, 40, could form the first single-party government since mixed-member proportional representation was introduced in 1996.
For months opinion polls had made grim reading for Ms Ardern’s challenger Judith Collins, leader of the conservative National Party, which held power between 2008 and 2017 .
But the sheer scale of Labour’s juggernaut victory was described as “a historic shift,” by political commentator Bryce Edwards of Victoria University in Wellington.
A record number of voters had cast early ballots in the two weeks leading up to the election, which was delayed for a month after a coronavirus outbreak in Auckland.
Ms Ardern’s popularity soared earlier this year after she led a successful effort to stamp out Covid-19.
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.
But with a fresh mandate, Ms Ardern now faces the challenge of delivering on the progressive transformation she promised but failed to deliver in her first term, where Labour shared power with a nationalist party.
In her victory speech she thanked voters “who may not have supported Labour before” and vowed to govern for every New Zealander.
“We are living in a polarised world… I hope in this election New Zealand has shown this is not who we are,” she said. “We are too small to lose sight of other people’s perspective.”
Of Ms Arderns’ current coalition partners, the New Zealand First Party had 2.6 per cent and the Green Party 7.6 per cent.
If she is unable to form a Labour-only government, she is expected to continue to rely on the minor Greens while jettisoning New Zealand First, which is on course to miss the 5 per cent vote threshold to enter parliament.
“People were very grateful and very happy with how we’ve handled COVID, they like the shape of the plan that we’ve got going forward from here for the economy,” said Finance Minister Grant Robertson, a top Labour MP.
Geoffrey Miller, analyst at political website Democracy Project, said the victory was “very much a personal triumph for Jacinda Ardern’s ‘superstar’ popularity and brand.”