The city has been named ahead of Leith and Stockbridge, in Edinburgh, and Finnieston in Glasgow, in the annual Best Places to Live in the UK survey.
Dundee is one of only two places, along with North Berwick to make the Scottish top 10 for the second year in a row.
Dundee’s cultural offering, world-leading university, waterfront regeneration project, facilities for joggers and cyclists, and even wildlife watching were all cited.
Other factors taken into account for the www.thesundaytimes.co.uk/bestplacestolive included employment, house prices, schools and “community spirit.”
A spokesman for the guide said: “Over the last couple of years, Dundee has seen a dramatic transformation into a vibrant, creative city, bursting with arts and culture, crowned with the arrival of the V&A Museum last September which has reconnected the city with its waterfront.
“There are new routes for cyclists and joggers, who stand a good chance of spotting seals or porpoises in the River Tay. Dundee has some great schools and a highly ranked university and is only an hour’s train ride from Edinburgh.”
The city has seen a huge spin-off from the V&A before, during and after the opening of the £80 million waterfront attraction.
It has attracted more than half a million visitors since its opening in September, but has also helped numbers soar at neighbouring attractions such as The McManus art gallery and museum, the polar research ship RRS Discovery and the Dundee Contemporary Arts Centre.
Recent plaudits for Dundee include being named one of the world’s “must-see” destinations by National Geographic, The Wall Street Journal and Bloomberg, and cited as one of Europe’s best destinations by Lonely Planet.
Dundee was also rated ahead of Port Appin, in Argyll, St Boswells in the Borders, Kilmacolm, in Renfrewshire, Killearn, in Stirlingshire and the Isle of Mull.
City council leader John Alexander said: “This accolade recognises the quality of the city and its facilities. Dundee is a city of attractive parks and green open spaces, located by the glorious River Tay with a beautiful beach at Broughty Ferry.
“Local people are familiar with the city’s benefits, with 99 per cent of them who responded to the council’s citizen survey saying they felt their neighbourhood was a good place to live.
“We have built an international reputation as a creative centre with arts and culture as a driving force in our ongoing transformation.
“The opening of V&A Dundee was a pivotal moment in this journey.
“The council and its partners are well aware that the city and its people face a number of challenges, but this latest accolade shows how much the perception of Dundee is changing.
“We are working hard to help create more job opportunities for people and to further improve affordable housing and public facilities across the city.
“All of the wider partners are committed to making Dundee a better city for everyone.
“This latest award is most welcome and will send a signal that Dundee is a vibrant place to be that has so much to offer.”
Professor Andrew Atherton, principal and vice-chancellor of Dundee University, said, “This is an extremely exciting time for Dundee and the accolade of being the best place to live in Scotland and one of the best in the UK is well deserved.
“There is a real vibrancy about the city at the moment with two fantastic universities carrying out world-leading work and the opening of V&A Dundee in addition to our many other thriving cultural institutions.”
Jane Ferguson, director of audiences and media at V&A Dundee, said: “Dundee has always had a lot to offer, and it’s great to see it now being recognised as an exciting, vibrant city and a wonderful place to live.
“The ambitious redevelopment Dundee is undergoing has helped the city reconnect with its historic waterfront and I’m delighted that V&A Dundee is part of that transformation.
“I hope this encourages more people to visit and discover for themselves what a fantastic place it is.”