Mr Bouterse won the necessary 36 votes out of 50 after weeks of negotiations with political factions following a narrow election victory in May.
Mr Bouterse, 64, first led Suriname after taking power in a coup in 1980.
He has been accused of killing political opponents and convicted of drug trafficking in the Netherlands.
His supporters waved flags and cheered outside parliament in the capital Paramaribo, after he secured enough votes for the presidency.
But opponents voiced dismay that the former coup leader had been elected.
"We have gone totally mad in this country," government employee Michael Charles told the Associated Press news agency.
Mr Bouterse's Mega Combination coalition won won 23 out of 51 seats in May's parliamentary election, so he had to get the backing of other parties to secure the two-thirds majority he needed to be elected president by parliament.
Desi Bouterse first seized power in a coup in 1980, five years after Suriname won independence from the Netherlands.
He stepped down under international pressure in 1987, then briefly seized power again in 1991.
In 1999 a Dutch court sentenced him in absentia to 11 years in prison for cocaine trafficking, but the two countries do not have an extradition treaty.
He is also facing a long-delayed trial in Suriname for his alleged role in the murder of political opponents in 1982.
Critics say his campaign for the presidency may have been motivated in part by a desire to secure immunity from prosecution.
The former military ruler of Suriname, Desi Bouterse, has been elected president by the South American nation's parliament.