"This city is positioned for growth," Mr Nagin told a crowd of cheering supporters after his election victory Saturday (local time). "We are ready to take off."
Mr Nagin, 49, defeated challenger Mitch Landrieu, who is Louisiana's lieutenant governor, with just 52 percent of the vote, according to uncertified official returns.
President George W. Bush called Mr Nagin on Sunday to congratulate him on his win, White House spokeswoman Christie Parell said.
"They talked for a few minutes about the importance of the federal and city governments continuing to work closely on rebuilding New Orleans," Ms Parell said.
The mayor enjoys a good relationship with Mr Bush, whom he thanked Saturday night for billions of dollars in federal aid.
But Mr Nagin has scant time for celebration, as he faces a monumental challenge in reviving this south coast city amid a multibillion dollar reconstruction effort and against a looming new hurricane season.
"We have citizens around the country who are ready to come back to New Orleans and we are going to bring them back to New Orleans," Mr Nagin said.
"This election is over and it's time for this community to start the healing process."
Almost nine months after the huge storm, entire New Orleans neighbourhoods remain virtually abandoned.
More than half the city's 465,000 residents remain scattered across the country. The relatively few residents who have returned to eastern New Orleans and the Lower Ninth Ward did not get running water until last week.
People urged to rally behind mayor
Mr Landrieu, also a member of powerful local political family, urged his supporters to rally behind Mr Nagin as he faces the difficult task of helping the ravaged city get back on its feet.
"We have an opportunity to put away the twin cousins of race and poverty," Mr Landrieu said in his concession speech.
However, some were unhappy at the prospect of a new Nagin term.
The president of the city's firefighter's union, Nick Felton, expressed
disappointment at the vote outcome and blamed Mr Nagin for an understaffed New Orleans' fire department which has to operate with broken equipment.
"Nagin has a combative attitude and he's indecisive," Mr Felton said, adding that he is worried about what will happen when the next giant hurricane hits because the vulnerable coastal city - which lies below sea level - is so ill-prepared.
The annual hurricane season runs from June to September.
The coming month will present incredible challenges to Mr Nagin to get the vast reconstruction effort on track, warned former lieutenant governor James Fitzmorris.
"He will have to build a stronger relationship with Washington and (Louisiana state capital) Baton Rouge and he'll have to bring the city together," Mr Fitzmorris said. "These are going to be tough times."
And it remains to be seen whether Mr Nagin, a former cable television executive and self-styled corporate turn-around artist who vowed to instill a more businesslike approach to government, will be up to the job.
Widely criticized for his handling of Katrina and the post-hurricane recovery, Mr Nagin announced last week that the city had obtained a 150 million dollar line of credit from a consortium of banks.
The move on the eve of the mayoral election quelled concerns the city might need to file for bankruptcy protection.
Mr Nagin has also struggled to turnaround the city's notorious violent crime rate, the nation's highest before Katrina.
The African-American mayor also lost the support of some white voters who had backed his 2002 election when he declared in January that God wished New Orleans to be a "chocolate" city - meaning majority black.