LA jumped into the top spot having occupied sixth place last year in the Schroders Global Cities 30 index, which ranks cities based on their economic prospects.
London climbed six places to second, making it the top ranked European city.
The index ranks cities on a range of factors including the projected growth of the economy, disposable incomes over the next decade and the size of the population.
This year for the first time university rankings were used as a factor. Schroders said this was the main driver of whether a city moved up or down the list.
Hugo Machin, co-head of global real estate securities at Schroders, said the scale and economic depth of LA made it a compelling location to work and live.
He said: “One of the key strengths of LA’s economy is that it is well diversified across multiple industries including financial services, media, trade and technology.
“The technology sector, in particular, has grown substantially over the past few years, and this has not only boosted demand for office space but also for residential property, much of it due to the increased hiring of millennials.”
Machin added London still has a competitive advantage in terms of location, language, scale, infrastructure and cultural diversity.
“If we add the global strength of its universities, London remains a favoured place to invest,” he added.
US mega-cities dominated the index, taking 18 of the top 30 positions, including four of the top five spots.
Boston saw one of the biggest leaps in the index going from 24th to third place. Chicago jumped from 10th to fourth, while New York, the most populous city in the US, held onto its fifth-place ranking.
However, Chinese mega cities fared less well. Beijing, which took the top spot in December, fell to 11th place, while Shanghai fell from second to 10th, and Shenzhen dropped from third to 24th place.
Paris, the only European city to feature in the index other than London, fell from 12th place to 16th.
