Best City to live in Australia
The liveability rating scores the cities on the challenges that an individual may face about stability, healthcare, culture, environment, education and infrastructure.
Melbourne scored 97.5 out of 100, one basis point more than Austria's Vienna.
Canada's Vancouver and Toronto ranked third and fourth respectively. Two other Australian capital cities, Perth and Adelaide are among the top seven cities. Sydney dropped out of the top ten cities.
Melbourne Lord Mayor Robert Doyle said the title was something all Melburnians should be proud of.
"We do not take this title for granted and are constantly planning and implementing policies that will continue to improve our quality of life."
Mr Doyle said the City of Melbourne would continue to work with all levels of government to ensure Melbourne remained a great place to live.
The decline in livability is largely due to the heightened fears over "terrorism" with more than 1, 000 reported attacks in 2016 so far, with incidents in France, Turkey, the US and Belgium being the most high profile. Factors such as social unrest in many US cities due to the deaths of black people in police custody, tensions in Eastern Europe and Asia and the ongoing civil wars in Ukraine, Syria and Libya have compounded the decline.