Ireland has risen nine places to seventh out of 61 countries in the 2016 IMD World Competitiveness Yearbook.
The IMD survey is a closely watched report published by the Swiss business school since 1989.
It compares countries based on both statistics available from a range of domestic and international sources and a survey of global executives.
It ranked Ireland first for growth in GDP or annual economic output, flexibility and adaptability of people and finance skills.
Meanwhile, the US lost its status as the world's most competitive economy as it was overtaken by China Hong Kong and Switzerland.
China Hong Kong was ranked first in the 2016 rankings, followed by Switzerland and then the US.
Singapore, Sweden, Denmark, Ireland, the Netherlands, Norway and Canada completed the top ten.
Today's study shows that Latin American economies are the most stagnant, while Eastern European nations continue to gain ground.
Commenting on the IMD survey, IDA Ireland's chief executive Martin Shanahan said that Ireland's ranking will assist the agency greatly when making the case for Ireland in boardrooms across the world.
"IDA Ireland has set ambitious investment and jobs targets in its current strategy. In order to achieve these targets, we will have to remain vigilant and monitor our competitiveness in areas like costs, property availability and talent," Mr Shanahan said.
He said that Ireland has regained valuable competitiveness in recent years, while continuing to offer a strong skills base to prospective companies looking to invest here.
But he warned that there is no room for complacency.
"Ireland must remain conscious of maintaining improved competitiveness in an export led economy, the provision of suitable skills coming through the workforce and Ireland must continue to provide business advantages that resonate with global companies," he stated.
Employers group Ibec also said that Ireland's rankings point to the immediate challenges posed to the sustainability of the country's economic prosperity.
Ibec pointed out that Ireland is ranked 40th for basic infrastructure, 19th for technological infrastructure, 21st for scientific infrastructure, 13th for health and environment and 18th for education.
"Despite having the fastest growing population and economy in Europe we are spending the third least on investment," commented Ibec's senior economist Gerard Brady.
"Our improved headline indicators will not last long in the absence of increased commitment to long-term planning and investment," he cautioned.
