The annual survey, which looks at items like housing, transport, food, clothing, and entertainment, indicates that higher rents helped Toronto surpass Vancouver as the Canadian city with the highest cost of living.
Toronto now ranks as the 59th most expensive city in the world, while Vancouver ranks six places lower.
The survey points to Ottawa as Canada's cheapest big city in which to live, ranking 114th in the world. Montreal and Calgary take 79th and 96th place respectively.
The most expensive cities in the world in which to live are Luanda, Angola, and Tokyo, with N'Djamena, Chad, Moscow, and Geneva rounding out the top five.
There were 214 cities on the list, with Karachi, Pakistan coming out as the world's least expensive city.
Mercer said higher gas prices contributed to rising consumer costs, but many cities in North America dropped down the global rankings as regions such as Australia felt a stronger burden.
The cost of living survey is designed to help companies and governments figure out compensation allowances for expatriate employees. The cost of housing plays a big part in the ranking because it is often the largest expense for expatriates.
New York is used as the base city for comparisons.
Source: The Canadian Press