He secured an absolute majority on Tuesday with the support of the Social Democrat Party (SPD).
This followed an initial failed attempt earlier in the day, where he fell short of the required votes to form a coalition.
The unexpected first-round loss prompted immediate discussions and a swift second vote.
Mr Merz's victory comes after the collapse of the previous SPD-led coalition and amid challenges including the war in Ukraine, economic struggles, and the rise of the far-right.