Ratzinger, the first German pope in nearly 1,000 years, was considered one of the frontrunners to lead the Roman Catholic church and its 1.1 billion followers.
Following Tuesday's vote, he stood at the balcony of St. Peter's Basilica in Rome before cheering crowds, saying, "Dear brothers and sisters, after the great Pope John Paul II, the cardinals have elected me -- a simple, humble worker in the vineyards of the Lord. I entrust myself to your prayers."
German Chancellor Gerhard Shroeder called the new pope a "worthy successor" to John Paul.
"That the new Pope Benedict XVI comes from Germany, that is a great honor for our whole country," Shroeder said. "In Pope Benedict XVI, a pope has been chosen who knows the world Church like no one else."
President Bush also offered his congratulations to the new pope, describing him as a "man of great wisdom and knowledge."
Ratzinger served as the Vatican's overseer of doctrine since 1981. During a homily he offered at the Mass preceding the conclave, or voting process, he urged fellow cardinals not to bow to the pressures of modern life.
"We are moving toward a dictatorship of relativism which does not recognize anything as definitive and has as its highest value one's own ego and one's own desires," he said.
He also cautioned that the Roman Catholic Church needed to resist the "tides of trends and the latest novelties" in religious thinking and instead stay true to the well-established concepts of the Church.
"We must become mature in this adult faith, we must guide the flock of Christ to this faith," he said.
The cardinals began their conclave Monday to replace Pope John Paul II, who died April 2 at age 84.
"It's only been 24 hours, surprising how fast he was elected," Vatican Radio said, commenting on how the new pope was elected after just four ballots.
Upon hearing the bells and seeing white smoke pour from the Sistine Chapel, thousands of pilgrims streamed into St. Peter's Square, chanting: "Viva il Papa!" or "Long live the pope!"