The once iconic Sandinista Cold War foe of Washington, now 60, was endorsed by virulently anti-US Venezuelan President Hugo Chavez but fiercely opposed by US officials.
Results based on 62 percent of polling stations showed Ortega getting 38.6 percent of the vote in Sunday's election, easily defeating conservatives Eduardo Montealegre and Jose Rizo, who got 30.9 percent and 22.9 percent respectively.
A projection by Ethics and Transparency, Nicaragua's top electoral watchdog, also showed Ortega comfortably surpassing the 35 percent needed to win the election outright in the first round, and taking a nine-point lead over Montealegre, a US-educated financier favored by Washington.
As the official tally of the ballots crawled along Monday, Ortega refrained from proclaiming victory. Montealegre said the race wasn't over until the last ballot was counted, and the US State Department said the vote was too close to call.
During the campaign, Washington had urged Nicaraguans to defeat Ortega, whose Soviet-backed Sandinista government seized private assets, distributed land to poor peasants and battled US-financed Contra rebels throughout the 1980s.
Ortega lost a 1990 election, and failed in two subsequent attempts to recapture power. For Sunday's election he dramatically toned down his revolutionary rhetoric, picked a former Contra as a running mate, and vowed to strengthen democracy.
He reiterated on Monday that if elected, he would respect private property, and said Nicaragua wants to improve relations with the international community.
"I want to collaborate with those who have more -- business leaders, bankers -- to eradicate poverty," he told journalists in Managua after talks with former US President Jimmy Carter, who led an electoral observer mission.
Washington still views him as a dangerous leftist with close ties to Venezuela and communist Cuba.
The US ambassador to Nicaragua, Paul Trivelli, had been vocal in urging Nicaraguans to defeat Ortega, calling him "a tiger who has not changed his stripes" and claiming a Sandinista victory would lead to "the introduction of a Chavez model" in Nicaragua.
Chavez has delivered cheap fuel to the energy-starved Central American country through mayors of the Sandinista party, and said more would be forthcoming under an Ortega government.
At the same time, Venezuela has repeatedly lashed out at the US administration, claiming it was interfering in Nicaragua's affairs.
International electoral observers were also critical of US comments during the campaign.
Cuba on Sunday hailed Ortega's apparent victory, which President Carlos Lage said marked "a defeat of the United States, which meddled in Nicaragua's internal affairs."
Some US lawmakers had suggested blocking remittances sent by Nicaraguans living in the United States, a critical source of funds in this country of 5.4 million people, almost half of whom live in poverty.
Nicaraguans on Sunday also voted to renew the 91-member unicameral Congress, which currently includes 40 deputies of Rizo's Liberal Constitutionalist Party, 38 Sandinistas and nine members from Montealegre's National Liberal Alliance.
An Organization of American States observer mission said the voting was "peaceful, massive and orderly, and was conducted in accordance with the law."