The victory by the governing centre-left coalition on Sunday kept Chile in pace with a steady leftward trend in Latin America.
With 67% of around eight million votes counted, Bachelet had 53.2% of the official count to 46.7% for Sebastian Pinera, a multimillionaire businessman.
Pinera quickly congratulated Bachelet as "president-elect" and said: "I also wish Michelle the greatest possible success."
He vowed "to continue to fight for our principles, which do not die today. Our battle continues".
Bachelet's centre-left coalition has governed Chile since the end of General Augusto Pinochet's rule in 1990. Its mix of socialist ideology with free-market economics has produced a booming economy.
Michelle Bachelet was tortured during Pinochet's rule, a former defence minister and a medical doctor. She is also a socialist who has parlayed her ability to connect with voters into becoming Chile's first woman president.
Pinochet's 17-year-rule was
marked by political violence
Bachelet's brief imprisonment and torture at the beginning of the 1973-1990 military rule and her unlikely later role as defence minister presented a compelling life story to Chileans.
She went into exile with her mother to Australia and Germany after they were both released from prison.
Her father, an air force general, died of a heart attack in a prison camp where he had been tortured.
He was one of about 3000 people who died or disappeared in political violence during military rule.
Bachelet is a separated mother of three and her liberal social ideas at times clash with Chile's conservative elite, but business leaders trust her to carry on the prudent economic policies of her mentor, Ricardo Lagos, the outgoing president.
Chile's economy, heavily supported by soaring prices for the nation's chief export, copper, has surged in the last two years. Under three consecutive centre-left governments Chile has become the region's star economy.
Chile has benefited from a mix of
socialism and free-market policy
"Together we recovered democracy for Chile," Bachelet, the front-runner during the campaign, said in a presidential debate.
"Now I invite you to be a part of another historic moment by electing Chile's first ever woman president. Let's make history."
A poll this month showed Bachelet winning high marks for honesty and trustworthiness, and with a huge lead over Pinera among lower-class women.
She had failed to win more than 50% of the vote needed for an outright victory in a four-way first round presidential race in December.
Bachelet, 54, is also drawing the support of young Chileans, particularly women who are making up a rapidly increasing percentage of the work force and who support one in three Chilean households.
Marta Lagos, head of the MORI polling firm, said:
"I think her brand of leadership will be tremendously close, tremendously friendly and tremendously unhierarchical.
"Now I invite you to be a part of another historic moment by electing Chile's first ever woman president. Let's make history"
"I believe she will make a real attempt to transform [Chile's] rigid social structure in terms of dismantling inequalities."
She said that otherwise Bachelet would continue policies of the Lagos government.
Critics have said Bachelet relies too much on her personal image and family history to fuel her popularity, and that she has failed to outline clear policies regarding how she will combat the wide gap between rich and poor in Chile.