The 62-year-old, who initially served as the South American country's first female leader between 2006 and 2010, defeated conservative Evelyn Matthei in a landslide runoff on December 15.
Hailing her victory as a historic moment, she has pledged to carry out far-reaching reforms such as free post-secondary education, raising taxes and adopting a new, more modern constitution.
In this second stint at the helm, Bachelet will have a chance to cement her legacy as a transformative leader who experienced the horrors of the 1973-1990 Augusto Pinochet military dictatorship firsthand.
During that dark period, Bachelet was tortured, fled the country, then returned years later to work as a pediatrician, eventually entering politics.
Her father died after being tortured for remaining loyal to leftist president Salvador Allende in the 1973 coup that saw Pinochet come to power.
Bachelet focused her 2013 campaign on promises of greater social justice in a country that has the highest per capita income of any Latin American nation.
As part of her ambitious reform agenda, she has said she hopes to bring Chile in line with a wave of social liberalism spreading across the once-conservative region, including by legalizing abortion and opening discussions on same-sex marriage.
But Bachelet is also inheriting an economy that is losing steam after some five years at a five percent growth rate. Growth next year is forecast at between 3.75 and 4.75 percent.
One of her first challenges, therefore, will be to dampen the soaring expectations for quick changes, with Asian demands for Chile's copper diminishing.
Chile is the world's top copper producer and its main client is China, whose appetite for the substance has ebbed.
Among other things, Bachelet has proposed increasing taxes to raise $8.2 billion for the state coffers.
However, she has admitted that four years will not be enough to meet all of the high expectations for reform.
In her first term, Bachelet revamped the pension system, improved health and social services, and focused on the well-being of Chile's working class and elderly.
She replaces outgoing conservative billionaire Sebastian Pinera, who struggled to reach a 50-percent popularity rating despite economic growth.