With just over 90 per cent of Sunday's votes counted, Mr Tudjman had won over 61 per cent with Social Democrat Zdravko Tomac on 21 per cent and Vlado Gotovac of the Social Liberal Party on just under 18 per cent.
The Organisation for Security and Cooperation in Europe (OSCE), which monitored the election, said it was free but not fair because of Mr Tudjman's domination of state television.
US Senator Paul Simon, who headed the OSCE mission, said Mr Tudjman would probably have won anyway but added: "While candidates were able to speak freely, the process leading up to the election was fundamentally flawed."
He said the election "did not meet the minimum standard for democracies."
Mr Tudjman's position is now stronger than ever, with his conservative nationalist HDZ party also entrenched in parliament and local government.
Officials said the turnout on Sunday was 57 per cent, one of the lowest since Croatia held its first democratic vote in 1990 while still part of Yugoslavia.
Celebrating at a banquet as the results came in, Mr Tudjman said: "I promise the continuity of the policy with which we established freedom and independence in Croatia, a stable economy and currency ... now we shall dedicate ourselves with all our forces to raising the standards of living for the entire population."
Mr Tudjman presided over a post-communist economic reform programme launched in 1993 which slashed inflation and stabilised the currency, boosting foreign investor interest and domestic growth in Croatia. But most Croatians are struggling to make ends meet after a war which destroyed infrastructure and shut factories.
The strong exchange rate hurts exports, and tourism, a big earner before the war, is only just beginning to pick up again.
Zarko Miljenovic, chief economist at Zagrebacka Banka, said he did not expect Mr Tudjman to be able to do much after already using a large part of the budget to compensate war victims. "Whatever was possible has already been done, and more." he said. "Unless there is a radical change in fiscal policy and more money is switched from military spending to social needs, I can't see a big improvement."
Mr Tudjman's popularity seems to have held, despite poverty and doubts about his health after reports from US administration officials that he has stomach cancer. After leading Croatia to independence from former Yugoslavia in 1991 and steering it through the 1991-1995 war against the Serbs, he is praised as a strong leader and idolised by many as "the Father of the Nation".
Mr Tudjman's first priority will be to manage the reintegration of the last Serb enclave in Croatia, Eastern Slavonia, which is currently run by the United Nations.
The region is due to revert to Zagreb's rule in July, which will involve the resettlement of thousands of people, among them Serbs who once revolted over Croatia's departure from Yugoslavia and fear for their future, despite Western pressure on Zagreb to treat them properly. "Tudjman's highest priority now will definitely be the reintegration of Eastern Slavonia," a diplomat said.