Peres, of the ruling Kadima Party, all but clinched the race after his two rivals withdrew after the first round of voting earlier in the day.
After six decades of government service, the 83-year-old political stalwart had told supporters this "may be my last chance to serve the country."
But beyond the personal victory for Peres, his election was seen as a way to the restore the dignity and prestige of the presidency, badly tarnished by allegations the current officeholder, Moshe Katsav, raped and otherwise sexually assaulted four female employees.
Though the presidency is a mainly ceremonial post, it had once been seen as the nation's moral compass. Israelis hope that Peres, with his international stature, will be able to rehabilitate the position.
Speaking at parliament ahead of the vote, Prime Minister Ehud Olmert of Kadima said "the history, actions and contributions of Shimon Peres to the State of Israel" made him "a model" for the ideal presidential candidate.
The president is elected in a secret ballot every seven years by the 120 members of Israel's parliament. Peres was the favorite to win in 2000, but in a startling upset, lawmakers gave the job to Katsav, a political backbencher who had the blessing of a prominent Jewish spiritual leader.
Bruised, but not bent by that defeat — one of a string of electoral defeats he has suffered in his career — Peres squared off Wednesday against former Knesset speaker Reuven Rivlin of the hawkish Likud, and Colette Avital of the dovish Labor Party. Peres has the mental acuity of a far younger man, and age was not an issue in the race.
Peres, a top aide to Israel's first prime minister, David Ben-Gurion, became a politician in his own right in 1959, when he was elected to parliament. He has held every major Cabinet post — minister of defense, finance and foreign affairs — and served three brief stints as prime minister, but never won the premiership outright in an election.
He was first propelled into the premiership in a caretaker role in 1977 after Yitzhak Rabin resigned. Between 1984 and 1986, Peres served a two-year term and then ceded the job to rival Yitzhak Shamir in an unusual arrangement after the 1984 general election failed to produce a clear winner.
Peres found himself unexpectedly stepping in for Rabin again after a political assassin gunned Rabin down in 1995. That term ended seven months later following Peres' 1996 surprise election defeat to Benjamin Netanyahu.
For nearly all his political life, Peres had been a member of Israel's founding Labor Party. But he bolted in 2005 after he lost the party leadership to Amir Peretz in another stunning upset. Peres joined the new, centrist Kadima Party, founded by longtime friend and political rival, Ariel Sharon.
Despite his electoral failures at home, Peres is appreciated abroad by world leaders who esteem his efforts to bring peace to the troubled Middle East. His key role in the first Israeli-Palestinian peace accord of September 1993 won him a Nobel Peace Prize, shared with Rabin and Palestinian leader Yasser Arafat, the following year.
Another well-known Israeli politician also made a dramatic comeback Wednesday, reports CBS News correspondent Robert Berger. Former Israeli prime minister Ehud Barak, a mere 65, the leadership of the dovish Labor Party.
Barak is best known for the Camp David Summit in 2000 with former President Clinton and Yasser Arafat. Barak offered a Palestinian state in half of Jerusalem and nearly all the West Bank, but Arafat refused sparking the second Palestinian uprising. Barak suffered a humiliating election defeat to Ariel Sharon a few months later.