The winning candidate, a 54-year-old economist, also known as Yameen Abdul Gayoom, contested as a Progressive Party of Maldives candidate. He bagged 51.59 per cent of the votes, compared to 48.41 per cent ballots secured by Nasheed, according to the Election Commission.
Yameen received 1,10,498 votes while Nasheed got 1,03,688 votes.
Over 90 per cent of eligible voters exercised their franchise in the second round of the much-delayed election to choose a new president amidst a gathering constitutional crisis.
The Majlis or Maldivian Parliament has scheduled a special session for the swearing-in ceremony.
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The results are likely to end more than a year of political turmoil since 46-year-old Nasheed resigned under duress in February 2012 in a controversial transfer of power.
In the first round of elections held in September, Nasheed led over Yameen and Jumhooree Party candidate Gasim Ibrahim but failed to secure a more than 50 per cent of the votes.
But before a run-off could be held, the results were annulled by the Supreme Court which cited irregularities in the voters' list.
The re-vote finally took place on November 9 and Nasheed again comfortably led in the first round but could not cross the half-way mark, resulting in today's run-off with runner up Yameen.
After two cancelled polls, foreign diplomats increasingly viewed delays as politically motivated and the European Union had warned of "appropriate measures" if today's election failed.
The international community insisted that the elections should be held according to the Constitutional provisions.
On Wednesday, the Maldives was expelled from the Commonwealth Ministerial Action Group, which is investigating the political chaos after repeated court interventions to prevent the presidential elections.