Merkel, who has topped the list of the world's 100 most powerful women in all but one of the years since she became chancellor in November 2005, beat out US Secretary of State Hillary Clinton and, in 3rd place, Dilma Rousseff, who became Brazil's first woman president on January 1 2011.
"German Chancellor Angela Merkel is head of the one real global economy in Europe and is the 'undisputed' leader of the EU," Forbes said.
"Although overseeing a booming economy and falling unemployment, she contends with a weakening support base and crisis in the eurozone, where Germany is often in the unenviable position of bailing out its weaker neighbours," the magazine opined. "She is out to stabilize EU debt and keep the 17-member eurozone unified."
It was Merkel's fifth time at the top of the list.
The 57-year-old politician led it from 2006 to 2009 but then was bumped back to 4th place last year by US first lady Michelle Obama, Kraft Foods chief executive Irene Rosenfeld, and chat-show host Oprah Winfrey.
Clinton, listed 5th in 2010, climbed to the second rung after more than two grueling years as US President Barack Obama's top diplomat.
"Clinton continues to earn high marks for advancing US interests and policies overseas and pushing women's issues, development and education to the top of the foreign policy agenda," Forbes said.
After Rousseff was Indra Nooyi, the India-born, naturalized American chief executive of Pepsi; Facebook chief operating officer Sheryl Sandberg; philanthropist Melinda Gates, leader of India's ruling Congress party Sonia Gandhi, Michelle Obama, International Monetary Fund chief Christine Lagarde, and Rosenfeld.
The list was heavily tilted toward Americans, 65 of the 100 places. Australia, China, India and Britain each had three spots.
The oldest on the list was Britain's Queen Elizabeth, 85 and ranked number 49; the youngest was 25-year-old pop queen Lady Gaga, ranked 11th.