Vienna has been crowned the city with the world's best quality of living while London fails to break into Europe's top 10 because of air pollution and traffic congestion, according to survey.
Mercer's 2014 Quality of Living rankings, which helps multinational companies and other employers compensate employees fairly when placing them on international assignments, put Zurich and Auckland in second and third place respectively, behind the Austrian capital.
The annual survey takes into account many factors when compiling the rankings, including a city's political, social, economic and socio-cultural environment as well as medical and health considerations.
"Political instability, high crime levels, and elevated air pollution are a few factors that can be detrimental to the daily lives of expatriate employees their families and local residents," said Slagin Parakatil, a senior researcher at Mercer.
Parakatil added: "In a world economy that is becoming more globalised, cities beyond the traditional financial and business centres are working to improve their quality of living so they can attract more foreign companies."
But London, often considered one of the world's major cities, was only ranked 38th on the list.
Ellyn Karetnick, UK Head of Mercer's International Mobility Practice, explained the UK capital has world class recreational facilities and expatriates living there are also spoilt for choice on consumer goods.
She added: "The city's excellent infrastructure and wide selection of education facilities available to expatriate workers and their families places it firmly in the top 50 for quality of living worldwide."
But lower ratings on factors such as air pollution and traffic congestion kept London from reaching the top 10 in Europe.
With a global rank of 73, Dubai is the highest-ranked city in the Middle East and Africa region.
The study found it to be followed by Abu Dhabi (78), Port Louis (82), Durban (85) and Cape Town (90).
Mercer said Durban has been identified as an example of an emerging city in this region, due to the growth of its manufacturing industries and the increasing importance of the shipping port.
Generally, though, this region dominates the lower end of the quality of living ranking, with five out of the bottom six cities – Baghdad (223) has the lowest overall ranking.
Parakatil said: "The Middle East and especially Africa remain one of the most challenging regions for multinational organisations and expatriates.
"Regional instability and disruptive political events, including civil unrest, lack of infrastructure and natural disasters such as flooding, keep the quality of living from improving in many of its cities."