The Tokyo-based institute evaluated six criteria for its overall judgement.
London came out on top.
New York finished second.
Paris finished third but scored highest in the Index's Livability and Accessibility categories.
The French capital scored less favourably in the category of economics and fell out of the top five for enviromental concerns.
One of the report's urban experts says Paris should thank its architectural and urban heritage for being named the world's nicest place to live.