With 90% of the votes counted, Bachelet had an unbeatable 62% to 38% for the center-right's Evelyn Matthei, who conceded defeat.
A moderate socialist, Bachelet served as president in 2006-2010, then ran the United Nation's women's agency from New York as her successor, conservative Sebastian Pinera, was confronted with widespread demonstrations for change.
She has a new center-left coalition and promises to finance education with higher corporate taxes, reduce the wealth gap, protect the environment and reform the constitution.
But concerns that turnout would be low had worried Bachelet, who needed a strong mandate to make good on her promises.
"This is an important day and I hope people can come and participate and through their vote give a clear expression of the kind of Chile where they want to continue to live," Bachelet said after voting in her Santiago neighborhood of La Reina. "The changes we need can't be produced through skepticism."
Bachelet, 62, left office with 84% approval ratings despite failing to achieve any major changes.
This time, activists are vowing to hold her to promises to raise corporate taxes to help fund an education overhaul and even change the dictatorship-era constitution, a difficult goal given congressional opposition.
Many Chileans blame policies imposed by Gen. Augusto Pinochet's 1973-1990 dictatorship for keeping wealth and power in few hands. Pinochet effectively ended land reform by selling off the nation's water, and preserved the best educations for elites by ending the central control and funding of public schools.
Opinion polls had pointed to a bruising defeat for Matthei, a former finance minister, because of her past support for Pinochet and her ties to the current president. Pinera, a billionaire entrepreneur, was Chile's first center-right president since democracy's return, and with just 34 percent support in the latest CEP poll, the most unpopular.
This was Chile's first presidential election after voter registration became automatic, increasing the electorate from 8 million to 13.5 million of the country's nearly 17 million people. But voting became optional with the change, and only 50% of voters turned out in the first round, frustrating both the major coalitions.
It also was Chile's first choice between two women, both with long careers in politics.
Bachelet, a pediatrician, and Matthei, an economist, share a dramatic history: Playmates while growing up on a military base, they found themselves on opposite sides of Chile's wide political divide after the 1973 military coup.
Matthei's father became a member of Pinochet's junta while Bachelet's father was tortured to death for refusing to support the strongman. Bachelet was imprisoned herself and forced into exile.
The two women remained cordial over the years while they rose through the ranks of the right and left.
Matthei, 60, had campaigned with a call to continue business-friendly policies that she credited for Chile's fast growth and low unemployment under Pinera. She backed Pinochet in a 1988 referendum on continuing his rule and now opposes changing the Pinochet-era constitution. She's also against gay marriage, abortion and higher taxes.
Bachelet is seen as having more charisma and empathy, but her critics say she's made mistakes.
When a devastating earthquake struck in 2010 killing more than 500 people just 11 days before the end of her term, the national emergency office failed to issue a tsunami warning. Many coastal dwellers had figured they were safe, and failed to run to higher ground.
"I want change and I don't like Mrs. Bachelet. She did so many bad things when she was president," said Olga Espinoza, 62, a maid who voted for Matthei. "How many people died in the quake because of her? We're the same age, we have the same zodiac sign, but I don't like anything about her."
Chile is the world's top copper producer, and its fast-growing economy, low unemployment and stable democracy are the envy of Latin America. But many Chileans are insisting that more of the copper wealth be used to fix the underfunded public education system.
"Abroad you often hear that this country has been growing and progressing more than others in Latin America, but it can't be just a matter of growth," Paola Bustamante, a 40-year-old sculptor, said after voting for Bachelet. "We need urgent educational reform, improvements to health, and I feel Bachelet can fulfill promises of deep changes this time around."
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