Analysts said the Kremlin's move to nominate Luzhkov for the post was an attempt to secure support in a key region ahead of parliamentary and presidential elections.
Members of the 35-seat Moscow City Duma voted 32-3 to select Luzhkov, who had been at the helm of the capital for 15 years, for another four-year term, a spokeswoman for the Duma said.
The vote was in line with new legislation, pushed through by the Kremlin in 2004, scrapping direct elections of regional leaders in Russia. They now are nominated by the president and approved by regional legislatures.
The widely popular Luzhkov is credited with turning a drab Soviet-style capital into a vibrant megalopolis bristling with high-rise buildings. But critics accuse him of running the city with a heavy hand and of taking control of billion-dollar industries such as real estate and construction.
Some residents also accuse him of despoiling the city's architectural heritage through the razing of historical buildings, allowing the construction of Stalinist-pastiche towers and promoting monuments by the widely disliked sculptor Zurab Tsereteli.
Unlike most other Russian politicians, Luzhkov has allowed himself to criticize federal government policies. But analysts say the Kremlin cannot afford to quarrel with Luzhkov ahead of parliamentary elections in December and a presidential vote in March and needs his popularity and authority to ensure that Muscovites show support to the Kremlin.
"There is no other person who is better at security electoral stability and stability in society (in Moscow) than him," said Boris Makarenko, an analyst with the Center for Political Technologies think tank.