Erdogan vowed to build a "new Turkey" and reconcile a divided country as he took to the balcony of his party headquarters in Ankara to give a triumphant midnight speech before tens of thousands of supporters.
But analysts have warned both he and Turkey may face turbulent times ahead as he prepares to beef up the powers of the president, which in recent years has been a largely ceremonial role.
Yesterday's polls were the first direct presidential elections in Turkish history - previously the head of state was chosen by parliament - and Erdogan has said he will be a "people's president."
"The Turkish people wrote history yesterday," declared the pro-Erdogan daily Sabah, with a picture of Erdogan giving the balcony speech with his hand clasped to his heart.
Also closely watched will be the future of outgoing president Abdullah Gul, a co-founder of the AKP with Erdogan, who has taken a distance from the premier and is keeping his future plans tightly under wraps.
In the end, Erdogan's victory was not the processional landslide many predicted but he still managed with a comfortable cushion to avoid the need for a second round against the main opposition challenger Ekmeleddin Ihsanoglu.
Turnout was 73.68 per cent, a figure that would be considered high in many countries but was sharply down on the 89 per cent turnout recorded in Turkey's local elections in March.
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