The local city parliament overwhelmingly approved Luzhkov, who was proposed by President Vladimir Putin, to serve another four-year term.
Luzhkov has been mayor for 15 years. His current term runs out in December.
"I consider the election for the high position of mayor of the capital as a tool to achieve those goals of development that Moscow and Muscovites need. We are confident we will achieve these goals," Luzhkov said before the vote.
Afterward, Luzhkov promised to work for the benefit of the city and to improve social conditions.
Direct elections of regional leaders were cancelled in 2004.
Candidates are now nominated by the president for approval by local parliaments.
Some analysts have speculated that the Kremlin decided to keep Luzhkov in office because Putin and his team believe the longtime mayor will be able to deliver the capital's voters during the upcoming election season.
RFE/RL's Russian Service quoted political analyst Andrei Ryabov of the Moscow Carnegie Center as saying that it would have been "extremely risky" for the Kremlin to replace Luzhkov prior to parliamentary elections in December and a presidential vote in March 2008.
(with wire reports)
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