Berlusconi won the vote, called to draw a line under the feud that has split the ruling center-right, by 342 to 275 with 3 abstentions after supporters of his rival Gianfranco Fini sided with the government.
In a speech to parliament that was interrupted by cheers from supporters and jeers from the opposition benches, Berlusconi warned that Italy needed to end the acrimony that has corroded politics for much of the year. "It is absolutely in the interests of our country not to risk a period of instability in this moment where the crisis is not yet over," he said.
Berlusconi's rare intervention in parliament follows the dramatic break in July with his former ally Fini, who has been effectively expelled from the ruling People of Freedom (PDL) party they created together in 2008.
The split left Berlusconi without a secure parliamentary majority after Fini took more than 40 lower house deputies and senators with him.
As expected, Berlusconi outlined a five-point policy program including reforms to the justice system, measures to increase the fiscal autonomy of regions, combatting organized crime and illegal immigration, and steps to help the poor south.
The result of the vote came as no surprise after Fini's supporters declared they would vote with the prime minister on the five-point plan, with which they are largely in agreement.
But in his speech to parliament, the leader of the rebels, Italo Bocchino, made it clear that in the future they would hold the balance of power that could mean life or death for the government.
"This shows that the government is not self-sufficient without us and that we are a force that Berlusconi will have to dialogue with in the future," Bocchino said.
Because of his role as speaker of the parliament, Fini watched the debate from his seat in the chamber but did vote.
There are few major policy differences between the Fini and Berlusconi camps but the dispute has been unusually bitter, with each side accusing the other of lies, smears and betrayal.
The next election is not due until 2013 but the divisions have run so deep that it is far from certain the government will survive that long and Wednesday's vote may only put off the day of reckoning.
"Today we are looking at a very serious crisis in the majority and I think it will be very difficult to resolve it," opposition lawmaker Roberto Colaninno said before the vote. "An open crisis will remain," he said.
Fini has denounced billionaire media entrepreneur Berlusconi for running the government like one of his private companies and he has been a fierce critic of a series of scandals implicating associates of the prime minister.
Berlusconi in turn accuses Fini, the speaker of the lower house of parliament, of treachery and says he is only motivated by egotism and personal ambition.
Public figures ranging from the head of the main employers' federation Confindustria to unions and senior members of the Catholic church have warned that the feud has distracted the government from the task of fostering reform, growth and jobs.
The problems facing Italy were underlined on Wednesday with new forecasts from the government which cut the outlook for economic growth next year to 1.3 percent and raised the public debt forecast to 119.2 percent of gross domestic product.
So far, a strong clampdown on public spending has kept Italy out of the turmoil that has hit other heavily indebted countries like Greece and Spain, but a prolonged government crisis could attract unfavorable attention.
The premium investors require to hold Italian bonds rather than benchmark German debt rose to its highest level since early June on Wednesday, although that move was due partly to new bonds coming on to the market.
