The 24-year old British sprinter was challenged to the line by green jersey rival, Norway's Thor Hushovd, at the end of a 196.5km stage from Marseille to La Grande Motte.And he again paid credit to his Colombia-Highroad team, in particular Mark Renshaw, who led a breakaway in the closing kilometres that fractured the peleton.
"We were the only team willing to take it on and what a way to stick it to everyone else," said Cavendish.
"It showed the domination that we have in the first week of a Grand Tour.
"It was closer than yesterday and Thor is one of the best sprinters on the planet but my team did everything right.
"It was a headwind finish so I left it late but Mark delivered me perfectly to the line. This is a victory for the team."
Lance Armstrong also got himself involved in the 25-strong breakaway group, supported by Astana's Yaroslav Popovych and Haimar Zubeldia.
It meant he gained 41 seconds on his team leader Alberto Contador and overtook him in the general classification.
Armstrong sits third overall, 40 seconds behind Switzerland's Fabian Cancellara, who maintains control of the yellow jersey, and 19 seconds ahead of Contador.
Meanwhile, Highroad team manager Bob Stapleton predicted his squad would suffer for their third stage efforts in Tuesday's team time trial - a 39km route around Montpellier.
It's the first team time trial since 2005, when Armstrong and his Discovery team were at their pomp.
Meanwhile, Armstrong insisted there was nothing sinister in his breakaway for the peleton, which included Contador.
"I was just trying to stay up front and stay out of trouble, and then it happened," he said.
"I turned around and was surprised that there was a split. I have won the Tour de France seven times, why wouldn't we ride at the front?"
Meanwhile, Great Britain's Bradley Wiggins, who had hoped to clinch the yellow jersey in Tuesday's team time trial as part of the powerful Garmin Slipstream squad, lost time and slips to fifth place overall, a minute behind Cancellara.
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