Researchers found that the British capital was a worse place to live due to the perceived threat of crime and terrorism, according to The Economist Intelligence Unit.
According to the study of 140 cities, published on Monday, Manchester had better health care and was a more "stable" city.
The Global Liveability study ranks cities based on 30 factors including health care, culture, environment, education and personal safety.
Manchester was ranked 42nd with an average rating of 90 while London was 11 positions lower with a rating of 88.4. The world average was 76.0 compared to the Western Europe average of 92.0.
"Manchester's liveability ... is slightly higher than London's because the factors that make them great places to visit also put a burden on them," said Jon Copestake, the report's author.
"London scores worse ... in the stability category because it has a higher perceived threat from petty crime and terrorism."
Vancouver topped the annual survey with a 98 rating while Australian and Canadian cities dominated the survey's top 10 locations. The highest European city was Austrian Capital Vienna with 97.4.
Harare, the capital of Zimbabwe, was named the worst city with 37.5 points, narrowly beating out the Bangladesh capital of Dhaka with 38.7.
"Mid-sized cities in developed countries with relatively low population densities tend to score well by having all the cultural and infrastructural benefits on offer with fewer problems related to crime or congestion," Mr Copestakehe added.