At the 79th Cannes Film Festival, which saw few films break out, Fjord found wide admiration for its engrossing tale of what Mungiu called "left-wing fundamentalism".
It stars Sebastian Stan and Renate Reinsve as Romanian Evangelicals who move to Norway, but soon after have their children taken from them by child services for spanking them.
Mungiu becomes just the 10th filmmaker to win the Palme d'Or twice.
His 4 Months, 3 Weeks and 2 Days, a Romanian abortion drama, won the award in 2007.
The win for Fjord extends one of the movies' most extraordinary streaks.
Neon, the specialty label, has now taken seven Palme d'Or winners in a row.
Fjord adds to its unparalleled run, including last year's champion, Jafar Panahi's It Was Just an Accident, and the 2024 winner, Anora.
The latter went on to win best picture at the Oscars.
The Grand Prix, or second prize, went to Minotaur, Andrey Zvyagintsev's domestic thriller set against Russia's war with Ukraine.
Loosely based on Claude Chabrol's 1969 film The Unfaithful Wife, Minotaur is about a Russian businessman suspicious of his wife's indiscretions.
At the same time, he's tasked with conscripting 150 of his workers for Vladimir Putin's war machine.
By wide consensus, it wasn't a banner festival. Hollywood largely sat out this year's edition.
Many of the selections struggled to bowl over critics. The global buzz that Cannes typically generates was fitful at best.
But the awards handed out on Saturday, as the 79th Cannes drew to a close, will significantly raise the international profiles of the winners.
Last year's Cannes produced a long string of Oscar nominees, including Sentimental Value and The Secret Agent.
The nine-member jury that decided the awards was headed by Korean filmmaker Park Chan-wook.
Demi Moore, Chloé Zhao and Stellan Skarsgård were also jurors.
Two films won for best director: the Polish filmmaker Pawel Pawlikowski, for his postwar drama Fatherland; and the Spanish creative duo Javier Ambrossi and Javier Calvo for The Black Ball, a generation-spanning queer epic The Black Ball.
Virginie Efira and Tao Okamoto, the two stars of Ryusuke Hamaguchi's All of a Sudden shared the best actress award.
In the elegantly empathetic drama, the two play women brought together in friendship out of their mutual sense of care for others.
The jury also split the best actor prize. They chose Emmanuel Macchia and Valentin Campagne, the two stars of Coward, Lukas Dhont's drama about young Belgian men sent to the frontlines of World War II.
The prize for best screenplay was awarded to Emmanuel Marre for A Man of His Time, a French drama about a Nazi collaborator in Vichy France. Marre based it on the experiences of his own great-grandfather.
The jury prize, or third place, went to German filmmaker Valeska Grisebach's The Dreamed Adventure, a crime drama set in a Bulgarian border town.
Saturday's ceremony was missing Barbra Streisand, who was to receive an honorary Palme d'Or, but a knee injury prevented her from attending.
Isabelle Huppert still celebrated Streisand during the ceremony, and she appeared in a taped video message.
The Camera d'Or, Cannes' award for best first film, went to Marie Clémentine Dusabejambo' post-genocide drama Ben'Imana, the first Rwandian film to be officially selected for the festival.
