Large swings to Labor across the country has increased the party's majority in federal parliament, as the coalition vote plunges to near-historic lows.
As of 11pm on Saturday, Labor has claimed 86 seats in the 150-electorate House of Representatives to the coalition's 40, securing the prime minister a greater mandate in his second term.
Mr Albanese is the first prime minister since John Howard in 2004 to claim back-to-back election wins.
Declaring victory in front of Labor Party faithful in Sydney, Mr Albanese said voters had made a clear choice.
"Together, we are turning the corner, and together, we will make our way forward with no one held back and no one left behind," he said.
"In this time of global uncertainty, Australians have chosen optimism and determination, Australians have chosen to face global challenges.
"Australians have voted for a future that holds true to these values, a future built on everything that brings us together."
Of all the Labor gains, the biggest scalp was Opposition Leader Peter Dutton's seat of Dickson in Brisbane, which he had held for 24 years.
It's the first time an opposition leader has lost their seat at a federal election with Mr Dutton losing to Labor's Ali France.
Conceding defeat, Mr Dutton said the election was not the result the coalition was after and accepted full responsibility for the party's loss.
"We didn't do well enough during this campaign, that much is obvious tonight," he told party supporters in Brisbane.
"I've always wanted in public life for the best for our country and the best for every Australian.
"It's an historic occasion for the Labor Party, and we recognise that."
Mr Dutton also apologised to other coalition members who lost their seat on election night.
"There are good members, good candidates, who have lost their seats or their ambition and I'm sorry for that," he said.
"We have an amazing party and we'll rebuild."
The coalition is on track to one of its lowest ever primary votes since the party was formed in the 1940s.
Labor has picked up marginal seats such as Leichhardt in Queensland, Bass in Tasmania, Sturt in South Australia and Deakin in Victoria.
But it could lose the formerly safe seat of Bean in the ACT to an independent, with the result too close to call.
Treasurer Jim Chalmers said he was proud of the campaign Mr Albanese and Labor had run.
"To get over the line, there is an element of relief but overwhelmingly gratitude to the country but also to our local communities," he told ABC TV.
"Anthony and his team, our campaign, was able to maintain the focus on the things that really matter, that people are focused on in their day-to-day lives."
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