With counting almost completed after Saturday's early vote, Muscat, 43, was on track to claim nearly 55 percent of the votes.
With counting almost completed after Saturday's early vote, Muscat, 43, was on track to claim nearly 55 percent of the votes on 92-percent turnout. That will give him a majority of up to nine seats in the island nation's 71-seat parliament.
Muscat, who is to be sworn in as premier on Monday, said the vote confirmed the trust voters had first placed in him in 2013 "despite one of the most negative electoral campaigns in the country's history.
"Those who thought the people would choose negativity do not know the people of Malta and Gozo," he said.
"The people choose positivity, optimism, energy, good will, unity and equality," he said, urging the country to unite after the divisive campaign.
Simon Busuttil, leader of the opposition Nationalist Party (PN), called Muscat to concede defeat. "As always, we respect the decision of the electorate," he said in a Tweet.
The victory means there will be no major disruption to the business of the European Union, whose rotating presidency Malta holds until the end of this month.
It was the first time since Malta became independent from Britain in 1964 that Labour, now located in the mainstream of European social democracy, has won back-to-back elections.
Muscat, who has been premier since 2013, went to the polls a year early after his wife was implicated in one of a series of alleged corruption cases.
All of them arose from information contained in the Panama Papers, a massive data leak from the Mossack Fonseca law firm that specialises in establishing secretive offshore companies and bank accounts for wealthy individuals from across the globe.
Muscat denies any wrongdoing and has promised to quit if any evidence emerges of his family having secret accounts used to bank kickbacks -- as had been alleged by a high-profile blogger with a record of correctly highlighting previous scandals in the island nation.
Muscat had also come under fire for not sacking his chief of staff Keith Schembri and government minister Konrad Mizzi after they admitted having previously undeclared companies set up for them by Mossack Fonseca.
But the allegations had little impact among Labour's loyal base against a backdrop of a thriving economy and the lowest unemployment the country of 430,000 people has ever known.
Busuttil had framed the vote as a choice between change and allowing Malta's international reputation, and its prosperity, to be shredded as a result of the taint of corruption damaging investment.
A former academic, Busuttil may now face a challenge for the leadership of his party with the preliminary count suggesting Muscat's was nearly as commanding as it was when he swept to power in 2013.
Since then, he has presided over an investment-led boom that has seen Malta's growth accelerate to three times the eurozone average and pushed government finances into a surplus.
Muscat also oversaw legislation introducing civil unions for same-sex couples and other anti-discrimination measures, and strong backing from the LBGT community has helped to underpin his electoral success.
In his second term, Muscat has promised to leverage the country's healthy finances to fund the biggest infrastructure project in its history, a 700-million-euro scheme to resurface every road in the densely-populated island nation.
He is also promising tax cuts and pension increases for working and middle class voters.
His election win will not however make the corruption issue go away with magistrates still looking into whether kickbacks were paid to members of his inner circle in relation to an investment-based citizenship scheme, a gas supply deal with China and the granting of bank licences.
Those probes will be watched closely in Brussels against a backdrop of mounting interest in the activities of Malta's financial services sector.
Germany in particular is demanding clarification of the status of nearly 2,000 Malta-registered companies it suspects were established as vehicles for illegal tax avoidance by major German corporations.
There are also fears among some economists that boom could easily turn to bust if the expansion of key sectors such as financial services and online gambling slows sufficiently to burst a real estate bubble which environmentalists have slammed as disastrous for the island.