Rao, MLC and Roads and Buildings Minister, secured 94,940 votes while defeating the main opposition Congress nominee Sucharita Reddy (49,258 votes), who was supported by the TDP and YSRCP.
CPI(M) candidate P Sudarshan Rao, who was backed by CPI, got 15,538 votes.
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Terming the result as a reflection of the TRS' two-year rule, Chief Minister K Chandresekhar Rao said it's a clear endorsement of his government by the people.
He advised the Congress not to resort to "cheap criticism", but play a constructive role of opposition.
"Wherever there is good governance, people are electing the ruling parties. Congress should change its attitude. They should stop criticising the government unnecessarily. Instead, they should give constructive suggestions. Otherwise, they will lose sympathy among public forever," said Rao, who is also TRS president.
He threatened opposition parties with defamation cases if they "resort to baseless allegations".
Palair in Khammam district is the second Assembly seat after Narayankhed in Medak district that the TRS has wrested from the opposition, after it came to power in 2014.
The TRS had also swept the civic body elections in Warangal, Khammam and Achampet in Mahabubnagar district in March this year. Besides, it also emerged victorious in Siddipet Municipality elections in Medak.
The TRS had also won bypolls in Medak and Warangal Lok Sabha constituencies, held in September 2014 and November 2015 respectively, and swept the Greater Hyderabad Municipal Corporation elections in February this year.
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