The ranking shows Melbourne with a higher overall rating in 2018 of 98.4, compared to 97.5 last year. Melbourne scored maximum points in healthcare, education and infrastructure, maintained its score in stability, and gained points in culture and environment.
Despite the improvement, Vienna leapfrogged Melbourne into the number one spot.
City of Melbourne Lord Mayor Sally Capp said it was an extremely tight contest, with only 0.7 percentage points separating the two cities.
"I'm delighted that Melbourne has improved its liveability ranking," the Lord Mayor said.
"This is the highest score in eight years, since our run at the top began.
"We offer our warm congratulations to the city of Vienna."
The Lord Mayor said that the Austrian city's ascension to number one was a chance to reflect on what makes Melbourne liveable.
"Our competitive spirit means we want to get back to the top. To do this we'll need to keep investing in our city and throwing up bold ideas to meet the challenges of the future."
The report, released today, found that Melbourne achieved the second highest score of 98.4 out of 100. Three of the top ten cities are in Australia, with Sydney ranked fifth and Adelaide tenth.
"It was a major achievement to top the EIU's Liveability Index for an unprecedented seven consecutive years. Melburnians can be proud that our city is continuing to improve but there are challenges ahead," the Lord Mayor said.
"This gives us an opportunity to pause and ask ourselves how we continue being a great city while growing at a fast pace."
The EIU Liveability Index is the world's most widely accepted ranking of liveability, comparing 140 of the world's major cities.
Vienna's relatively low population of 1.8 million was a factor in its liveability with the EIU report highlighting that cities with higher populations face greater challenges. The population of greater Melbourne is 4.6 million.
"Melbourne will overtake Sydney as Australia's biggest city sometime in the 2030s. By 2050, we'll be twice as big as we are now. I want to help ensure we have the infrastructure, services, and strong sense of community we're renowned for into the future," the Lord Mayor said.