Conservative Party candidate Michael Davidson won 545 and ACT candidate Lyall Russell won 120 votes.
The National Party also won the party vote with 16,046 votes with Labour second on 6238, New Zealand First on 3735 and the Greens won 1884 votes.
"I'm extremely pleased and grateful to the people of the Rotorua electorate for showing confidence in me and giving me the opportunity to work hard and deliver for them," Mr McClay said.
He spent the night with about 200 party faithful at the Rotorua Club.
"This has been my best campaign, it will take a day or two for us to digest what's happened but I'm extremely humbled by the result and tomorrow will look at what we need to do in the electorate in the next three years," Mr McClay said.
Mr Coffey said he will weigh up his political future in the next few days after spending the night at the Rotorua Citizens Club with his supporters.
Image 1 of 18: 200914bf14 Todd McClay celebrates his victory with family and supporters at the Rotorua club Photo/Ben Fraser
"It's been really tough fighting the John Key tidal wave, it was a steep learning curve for me and I learned a lot.
"I think we really shook the tree and got lots of people motivated and fought the good fight.
"We did everything an opposition candidate should do."
Mr Coffey said he called Mr McClay to congratulate him about 10.30pm.
"We need to keep our heads up and think about the next move," Mr Coffey said.
- Read Monday's Rotorua Daily Post for full interviews and reaction from the 2014 election.
All votes have been counted in the Rotorua electorate and Todd McClay will represent the city for a third term. His winning margin was cut by 256 on the 2011 election.
The votes are being counted - 62.2 per cent of polling booths counted in Rotorua.
Todd McClay says he is cautiously optimistic about half way into the count for the Rotorua electorate.
"I'm really pleased with how the count is going so far, but there is still a long way to go. "I'm surrounded by one of the biggest groups of supporters I have had at any election and we're all looking forward to see the final outcome."
His rival Tamati Coffey has not given up saying he and a nervous support team were watching and waiting to see how the count progressed.
"Everyone has a knot in their stomach, there's still a long way to go," Mr Coffey said.
In the electorate race Todd McClay is ahead with 866 of the votes counted, Tamati Coffey has 405 votes so far.
At 7.20pm there had been 199 votes for Todd McClay and 59 for Tamati Coffey. National were leading the party vote with 180 and New Zealand First were in second with 40.