The central electoral committee said a count of more than 98 percent of the ballots gave Mr Parvanov 75.7 percent of the vote, while his rival scored 24.3 percent.
"This is an unprecedented, historic result," he told a news conference.
"The result is a recognition of the policies we followed during our first
five-year term," he said, adding that he would continue to be a president with "a clear social engagement at home".
Mr Parvanov is the first Bulgarian president to be re-elected since the fall of communism in 1989, and now all but certain to fulfil his dream of presiding over the entry of his Balkan nation into the European Union on January 1.
He promised to continue what he called an "active" and "consistent" foreign policy.
"It will be oriented towards securing a dignified European Union membership, and at the same time maintaining our national identity and working in solidarity with our European partners."
Mr Parvanov, a pro-European former leader of the Socialist Party who prided himself in being "the president of all Bulgarians," won the first ballot last weekend with a commanding lead of 64 percent against Mr Siderov's 21.5 percent but failed to avert a run-off as voter participation was below 50 percent.
No minimum turnout was required in the second round. The election committee said turnout by early Sunday evening was 41.2 percent.
Support for the youthful 49-year-old leader has surged since he first took office in 2001, making him Bulgaria's most popular and trusted politician.
Under his leadership, Bulgaria joined NATO in 2004 and earlier this year received the green light to join the EU.
He also played a key role in the formation of the current Socialist-led government after inconclusive general elections last year and the ensuing political deadlock threatened to stall reforms and postpone EU accession.
Mr Parvanov also supported the signing of an agreement to set up three US military facilities in Bulgaria.
At the same time, he has worked to thaw Bulgarian-Russian relations, which have deteriorated badly since the fall of communism.
A proponent of ethnic tolerance, he developed good relations with the Turkish minority Movement for Rights and Freedoms party. He was fiercely attacked as a "Turkish puppet" by runner-up Siderov, known for his hostile statements against Bulgaria's Roma and Turkish minorities, each of which comprise 10 percent of the population.
A sharp-tongued populist speaker, Mr Siderov garnered support from many disillusioned Bulgarians, impoverished during the transition period from communism and apprehensive about the challenges of EU membership.
Nevertheless, by simply gaining a berth in the two-way final race, the former journalist changed his country's political landscape by ripping apart its traditional balance between moderate left and right-wing parties.
"What we achieved is a feat in peacetime," Mr Siderov told a press conference late on Sunday, lashing out against "the sea of malice ... the consistent, massive, evil campaign fought against us from all sides".
"Our result marks a crucial stage in the development of Bulgarian nationalism that has now proved itself a factor in Bulgarian politics and can no longer be disregarded or played down," Mr Siderov said.
In his last public appearances before the vote, Mr Siderov sought to tone down his rhetoric, but after losing the run-off he returned to a more radical discourse against "the mafia that stops at nothing."
"Parvanov was elected with the votes of the Roma neighbourhoods and the
Turks," he said.