Rochester was one of three Minnesota cities to make the list, with Minneapolis coming in at No. 23 and St. Cloud at No. 75. Bellevue, Wash., topped the list with Georgetown, Texas, Buford, Ga., Marina del Rey, Calif., and Bethesda, Md., rounding out the top five.
Fortune said it compiled the list based on exhaustive statistical and qualitative research including housing prices, schools, cultural and recreational attractions, quality of labor force, taxes and regulatory climate.
"Information technology and medical research converge in Rochester," Fortune said of Rochester. "The city is a major biotech hub, hosting a University of Minnesota campus, a branch of the Mayo Clinic that employs more than 25,000 area residents, and IBM Rochester's genetics supercomputer, BlueGene."
Notable cities ranking below Rochester include Winston-Salem, N.C. (No. 56), San Jose, Calif. (No. 66) and Orlando, Fla. (No. 73).
For a complete listing, pick up a copy of April's issue of Fortune Small Business or visit money.cnn.com/magazines/fsb/bestplaces.