The veteran left-winger saw off challenger Smith with 61.8% of more than half a million votes cast in the contest.
It marks his second huge win in little more than 12 months following an influx of grassroots supporters.
His tally of 313,209 votes was more than 60,000 higher than the 251,417 (59.5%) he secured in 2015.
Smith took 193,229 votes — 38.2% of the 506,438 votes cast out of a total electorate of 654,006.
Corbyn thanked voters for their “trust and support” and told defeated challenger Smith they were “part of the same Labour family”. He urged Labour to “wipe the slate clean” and unite under his leadership after he was re-elected.
Corbyn called on Labour MPs to help build support for “a genuine alternative” to the Conservative Government.
“I have no doubt this party can win the next general election whenever the prime minister calls it, and form that next government,” he said.
“To do that, we have all got to work together.”
Corbyn said he had a responsibility as leader to unite the party at conference, in parliament and across the country.
But he added: “It is also the responsibility of the whole party — members of parliament, councillors, party members and our wonderful supporters across the country — to work together and respect the democratic choice that’s been made.”
He urged all Labour supporters to join him in taking part in a national day of action next Saturday against May’s plans to expand selection in education and open new grammar schools.
Smith, who left the hall in Liverpool without making a concession speech, later said: “Congratulations to Jeremy Corbyn on being elected decisively as our leader.”
“Now is time for all of us to work to take Labour back to power.”
“I am proud and privileged to have stood to lead our party and to have won the support of 193,000 members and supporters. Thank you all.”
Responding to the Labour leader’s re-election, Conservative Party chairman Sir Patrick McLoughlin said: “Labour are too divided, distracted and incompetent to build a country that works for everyone.”
“One hundred and seventy-two Labour MPs don’t think Jeremy Corbyn can lead the Labour Party — so how can he lead the country?”
“Instead of learning lessons from the past, they have engaged in a bitter power struggle that will continue even after they’ve picked a leader.”
“While Labour row amongst themselves, this Conservative government will continue to deliver a country that works for everyone, not just the privileged few.”
Len McCluskey, leader of Unite and one of Corbyn’s key backers, said the party’s MPs should now listen to its members and stop the “sniping, plotting and corridor coups”. McCluskey said: “This election contest was needless, a distraction that the Labour party and its members could have done without.”
“But after a summer of unrest we can now look forward to the party taking on this Conservative government, exposing its divisive and elitist policies.”
“We urge Labour MPs to heed the signal sent by the members — twice now in one year — about the direction they want for the party.”
“This includes respecting and supporting the elected leader and his team; no more sniping, plotting and corridor coups.”
The results of the leadership election were announced shortly before midday.
After private talks this week with senior MPs on Labour’s moderate wing, Corbyn is expected to seek to rebuild his shadow cabinet.
The resignations in June left him unable to fill all his shadow ministerial posts but reports have suggested that as many as 14 may be ready to return following the failure of Smith’s bid to unseat him.
But others, including Hilary Benn, Yvette Cooper and Chuka Umunna are thought likely to focus on their bids to secure the chairmanship of influential parliamentary committees, which will allow them to take prominent roles scrutinising Theresa May’s government from outside Corbyn’s camp.
Labour’s ruling national executive committee is due to meet after the result is announced, having put off a decision earlier this week on proposals to restore elections to the shadow cabinet, which might have given some centrist MPs a route back into Corbyn’s top team.
A Labour peer is set to resign from the party after Jeremy Corbyn’s re-election over the anti-semitism row.
Lord Mitchell, who is Jewish, said he would quit if the Labour leader was re-elected over his handling of supposed anti-semitism in the party,
Following news of Corbyn’s leadership victory, Lord Mitchell said “I am a man of my word”. The businessman was made a Labour peer in 2000 and served as a frontbencher under Ed Miliband.
In a letter to The Times in August, Lord Mitchell wrote: “As a Jew, I find the allegations of anti-semitism in the Labour Party very distressing.
“Even more upsetting is the way Jeremy Corbyn dismisses what he has permitted to fester at the highest levels of our party.
“I have come to the painful conclusion that were Corbyn re-elected... I will have to resign my membership of the Labour Party.”
“I cannot remain a member of a party that goes against such a crucial issue that I hold dear.”
Following Corbyn’s re-election, Mitchell told the Press Association: “I will be making an announcement tomorrow.”
“But let’s say I’m a man of my word.”
