But his term in office has been dogged by the deep schism between his own Fatah movement in the West Bank and the militant Hamas movement, which controls the Gaza Strip.
Mr Abbas, opposed to armed struggle and committed to pursuing an independent Palestinian state through negotiations, has enjoyed strong support from the international community.
Under his leadership, US and European money has flowed into the West Bank to build up security forces which he has used to crack down on militant activity and Hamas's political infrastructure.
But in the face of scant progress from years of negotiations, and the tough stance of the right-wing government of Israeli Prime Minister Benjamin Netanyahu elected in early 2009, his strategy has looked increasingly bankrupt to many Palestinians.
A year after Mr Abbas won presidential elections, he suffered a major blow as Hamas gained a sweeping victory in legislative polls.
A short-lived unity government was formed after months of wrangling, but fell apart in June 2007 as factional street battles broke out in Gaza and Hamas drove Fatah's security forces from the Strip.
From then on, Mr Abbas ruled the West Bank only, essentially by presidential decree.
And when his four-year term ended in January 2009, Hamas declared him illegitimate - although he argued that the Palestinian basic law called for presidential and legislative elections to be held at the same time, so he could legally stay in post for a further year until legislative polls due in January 2010.
In November 2008, he also was elected "president of a future Palestinian state" by the Palestine Liberation Organisation.
He had been chairman of the umbrella body - which represents Palestinian political factions (although not Hamas) and conducts negotiations with Israel - since the death of its previous leader, Yasser Arafat, in 2004.
But the move was seen as a way of shoring up his authority.
Mr Abbas has walked a delicate line between appeasing Israeli and US demands that he improve security and participate in peace negotiations, and popular Palestinian pressure for genuine political and economic progress.
And he has, in the past year, undermined his already fragile poll ratings with misjudged comments and actions.
Even Fatah supporters were angered when Mr Abbas was slow to condemn the punishing military assault that Israel launched on Gaza in December 2008, and criticised the Hamas rocket fire Israel said it was trying to end.
And Mr Abbas's credibility suffered further when the PA initially agreed, under Israeli and US pressure, to allow the postponement of a UN vote on the Goldstone report which was heavily critical of Israel's conduct during the operation.
But, under him and his appointed Prime Minister Salam Fayyad, the West Bank economy has shown signs of improvement while Gaza has suffered under a crippling Israeli-Egyptian blockade aimed at weakening Hamas.
Born in Safed in British Mandate Palestine in 1935, he is one of the few surviving founder members of Fatah - the main political grouping within the PLO.
In exile in Qatar during the late 1950s, he helped recruit a group of Palestinians to the cause. They went on to become key figures in the PLO.
He co-founded Fatah with Arafat and accompanied him into exile in Jordan, then Lebanon and then Tunisia. In the early days of the movement, he became respected for his clean and simple living.
Mr Abbas studied law in Egypt before doing a doctorate in Moscow. He is the author of several books.
But some Jewish groups have criticised both his doctorate and the resulting book, The Other Side: the Secret Relationship Between Nazism and Zionism, as works of Holocaust denial.
They claim he downplayed the number of victims and accused Jews of collaborating with the Nazis.
He denied that charge in an interview with the Israeli daily Haaretz in May 2003.
"I quoted an argument between historians in which various numbers of casualties were mentioned. One wrote there were 12 million victims and another wrote there were 800,000," he told the newspaper.
"I have no desire to argue with the figures. The Holocaust was a terrible, unforgivable crime against the Jewish nation, a crime against humanity that cannot be accepted by humankind," he said.
Mahmoud Abbas always kept to the background, but also built up a network of powerful contacts that included Arab leaders and heads of intelligence services.
This enabled him to become a successful fundraiser for the PLO and to take on an important security role in the early 1970s, before being appointed head of the PLO's department for national and international relations in 1980.
Regarded as a pragmatist, he was one of the main initiators of the dialogue with Jewish left-wing and pacifist movements in the 1970s and in the difficult years before negotiations were eventually started between Israel and the Palestinians.
Viewed as one of the architects of the Oslo peace process, he accompanied Arafat to the White House in 1993 to sign the Oslo Accords.
Mr Abbas was the PA's prime minister from May 2003 until his resignation almost four months later after a power struggle with Arafat over control of Palestinian security forces.
His leadership assumption of leadership after Arafat's death was meant to open a new chapter in Israeli-Palestinian relations in which the peace plan known as the roadmap was meant to lead both sides towards resolution.
But the bitter struggle between the Israel and Hamas has to a large degree left him on the sidelines.
Mr Abbas currently governs only a portion of the territory controlled by Palestinians. And, in spite of all his pragmatism, he faces a right-wing Israeli prime minister with whom he cannot find common ground.
Mahmoud Abbas, also known as Abu Mazen, has led the Palestinian Authority since he was elected as its president in January 2005.