Erdogan faced no competition in the vote, which was held at a congress of his Justice and Development Party (AKP) in a sports arena with thousands of party members and guests in attendance.
It was Erdogan's last congress as prime minister and party leader as AKP bylaws set a limit of three consecutive terms.
Erdogan, who is widely expected to run for the presidency in 2014, said in a speech often interrupted by applause that service was more important than titles.
The remark was interpreted as a strong sign that he wants to become the country's first popularly elected president under a 2007 constitutional amendment setting a five-year presidential term, renewable once.
More than 100 foreign guests including Egyptian President Mohamed Morsi, Iraqi Kurdish leader Massud Barzani and Khaled Meshaal, the head of the Hamas movement, attended the congress.
"We have shown everyone that an advanced democracy can exist in a predominantly Muslim country," Erdogan told the congress. "We have become a role model for all Muslim countries."
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This is the sign of a ''great'' leader. I am in Turkey today only because of Turkey’s Prime Minister Mr. Recep Tayyip Erdogan. He is the only one leader in Muslim Ummah who has invited youth from all the Muslim's countries to study ''free of cost'' and on Turkish Government expense.