She won 314 out of the 374 votes by Tory members of Parliament, while 33 supported challenger Anthony Meyer, 24 abstained and 3 didn't show up to vote.
Even though 60 of her fellow Tories did not vote for her, Thatcher declared that the result showed "overwhelming support."
"I'd like to say . . . how very pleased I am to have had the overwhelming support of my colleagues in the House and of the people from the party in the country," she said outside her No. 10 Downing St. residence Tuesday night.
Ordinarily, the result would have been regarded as an unassailable vote of confidence. But in Thatcher's case, it provoked conflicting assessments.
The 64-year-old prime minister has been reelected unopposed every year since becoming Conservative leader in 1975, and she has stamped her style and authority on the party to such an extent that any rebellion becomes a major event.
The consensus among analysts had been that anything under 45 not supporting her would be a crushing victory, while 100 or more would be a devastating blow.
Meyer, 69, a little-known outsider, put up his candidacy to rally opposition to Thatcher's handling of the economy, her tough style of leadership and her reluctance to integrate Britain deeper into the European Community.
The outcome was expected to keep speculation alive about a more closely run contest next year if the economy does not improve and Thatcher's poll showings slump.
Thatcher government policies are blamed for an annual inflation rate of 7.3%, a falling pound and 15% interest rates.
She is in her third term in office and is the longest-serving prime minister this century.