Brazilian President Dilma Rousseff is next in the list, making the top three spots unchanged from last year. Forbes cited Rousseff for her leadership of the world's eighth-largest economy and approval ratings within her country.
58-year-old Jill Abramson the Executive Editor of New York Times made it to the fifth spot.
Sheryl Sandberg who has spent four years as Facebook's COO is at number 10.
Christine Lagarde, Managing Director of International Monetary Fund is next in the list. She is the first woman to run IMF.
US First Lady Michelle Obama, who had topped the list in 2010, is at number 7.
Sonia Gandhi, president of the Indian National Congress, follows at number six.
Forbes magazine ranked German Chancellor Angela Merkel the most powerful woman in the world for the second year in a row in the annual list dominated by politicians, businesswomen and media figures.
Melinda Gates, co-chair of the Bill and Melinda Gates Foundation and wife of Microsoft Corp co-founder Bill Gates is fourth in the list.
Janet Napolitano, the first female head of the Department of Homeland Security, United States is at number 9.
US Secretary of State Hillary Clinton is placed second in the list. Clinton was applauded for her handling of crises such as the release of a trove of diplomatic cables by the anti-secrecy group WikiLeaks.