The Three Lions have moved up from fourth in the list having finished top of Group C in their unbeaten Euro 2024 qualifying campaign.
Despite struggling in their final two matches against Malta and North Macedonia, England have leapfrogged above Brazil, who have dropped down to fifth.
Only the 2022 World Cup finalists Argentina and France now sit above Gareth Southgate's side, with the South Americans top of the pile.
It is the third time since the FIFA rankings were introduced in 1992 that England occupy third position.
They previously sat there under Roy Hodgson's tutelage briefly in 2012, before again lifting to third shortly after the delayed Euro 2020 final.
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England stood 12th in the rankings when Southgate succeeded Sam Allardyce in 2016, but they have been a permanent resident of the top six since their run to the semi-finals in the 2018 World Cup.
Southgate has made no secret of his desire to be the world's No1-ranked nation, as he challenged his squad to strive to be the best.
Speaking ahead of the 0-0 draw away at North Macedonia, he said: "Am I driven by being ranked No1?
"Yes, because ultimately you achieve that through consistency and you've got to play well in the tournaments as well because the ranking points are higher in the tournaments.
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"Also, it sets behaviours every day on the training pitch, off the training pitch.
"If you are going to be the top-ranked team, there's no room for sloppiness or casualness. That's got to be our drive."
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Elsewhere in the new FIFA rankings, Belgium are in fourth spot ahead of Brazil, with the Netherlands, Portugal, Spain, Italy and Croatia completing the top ten.
As for Scotland, despite qualifying for Euro 2024, they have dropped down two places to 36th following their draws against Georgia and Norway.
Meanwhile Wales, who will play Finland in their Euro 2024 semi-final play-off, have slipped from 28th to 29th.
Following a disastrous qualifying campaign where they finished fourth in Group B with just two wins [both against Gibraltar], the Republic of Ireland are now 60th - down two places.
Qatar incredibly now sit above The Boys in Green, with Northern Ireland 72nd - up from 75th after beating Denmark last time out.