The 30-share barometer, which lost over 115 points in the previous two sessions, rose by 181.41 points, or 0.98 per cent, to 18,760.91.
All the sectoral indices, led by metals, power and auto, were trading with gains of up to 1.33 per cent.
The wide-based National Stock Exchange index Nifty gained 48.90 points, or 0.86 per cent, to 5,698.40.
Brokers said fresh round of buying by funds and retail investors amid a firming trend in the global markets as eurozone debt concerns were eased on expectations that economic reform and budget plans unveiled by Spain may pave the way for a bailout, buoyed the trading sentiments here.
Besides, beginning of new monthly settlement in the derivatives segment supported the rally, they said.
In Asian region, Japan's Nikkei was up by 0.41 per cent, while Hong Kong's Hang Seng index gained 0.60 per cent in early trade.
The US Dow Jones Industrial Average had gained 0.54 per cent in yesterday's trade.
