Letta sailed through the vote, which was triggered by the expulsion of Silvio Berlusconi, as widely expected, with 379 members of parliament voting in favour and 212 against out of the 591 lawmakers who took part.
The upper house Senate was set to vote later Wednesday.
Ahead of the vote, Letta vowed to rescue Italy from populism amid simmering social tensions.
Letta promised a pro-European agenda and reforms to increase political stability in the recession-hit country, condemning forces of "chaos" after sometimes violent anti-austerity protests this week across Italy.
"We will not allow Italy to sink again," Letta told lawmakers, promising to "fight with everything I have to avoid our country being thrown back into chaos just as it is beginning to lift itself up again".
"Today we are drawing a clear line. On this side are those who love Europe... knowing that without the European Union we would plunge into the Middle Ages.
"On that side are those who want to block Europe," he said in a thinly-veiled reference to Berlusconi and the anti-establishment firebrand politician Beppe Grillo.
Letta admitted that instability had "weakened" his government but voiced hope that a widely expected victory in the confidence vote later on Wednesday would give his coalition a stronger mandate to govern.
He said he would impose further cuts on Italy's overweight bureaucratic machine and aim for gross domestic product (GDP) growth of 1.0 percent in 2014 and 2.0 percent in 2015, while also slashing debt.
"Italy will shake off the image of an unstable, Baroque country that can never decide anything," said Letta, who came to power in April following a two-month stalemate after an inconclusive general election.
Social tensions have marred the parliament vote, which was called after the scandal-tainted Berlusconi's party quit the ruling left-right coalition and he was ejected from parliament over a tax fraud conviction.
Berlusconi's departure from the coalition would have brought down the government but a group of the 77-year-old playboy politician's former proteges broke from him and chose to stay in the cabinet.
In a sign of the social tensions shaking Italy, truckers meanwhile staged protests in an anti-austerity movement led by the "Forconi" (Pitchforks) group and they were due to hold a rally in Rome on Wednesday.
Members of the Fiom metalworkers' union were also expected to take to the streets of the Italian capital to demand more help from the government to save jobs.
Security forces were out in force in Rome and Interior Minister Angelino Alfano said earlier he would not allow "cities to be set on fire" by protesters.
Letta's cabinet won some breathing space this week with the news that the economy has stopped contracting and an end to the country's longest post-war recession is imminent. But unemployment and poverty are still rampant.
The vote comes after the election on Sunday of the 38-year-old mayor of Florence, Matteo Renzi, to the leadership of the Democratic Party, the main centre-left party, in a major shift in Italian politics.
The ambitious Renzi, who is already being seen as a possible future prime minister, has had his differences with Letta but has promised to work together with him.
Letta on Wednesday said he would aim to conclude a governing "pact" in the coming weeks with concrete measures to be adopted next year to boost Italy.
One major hurdle will be a much-needed overhaul of Italy's electoral law, which was widely blamed for the inconclusive result of the latest parliament elections.
Italy's constitutional court earlier this month declared parts of the law unconstitutional, fuelling calls for an immediate change that could give the country some much-needed political stability.