The committee praised Obama for "his extraordinary efforts to strengthen international diplomacy and cooperation between peoples."
"Very rarely has a person to the same extent as Obama captured the world's attention and given its people hope for a better future."
The laureate wins a gold medal, a diploma and 10 million Swedish crowns (1.4 million dollars or 878,000 pounds).
Obama was one of a record 205 nominees for this year's prize and the decision has come as a surprise to many. Zimbabwe's Prime Minister, Morgan Tsvangirai, had been tipped as one of the favourites.
Despite his ambitious international agenda, Obama is yet to make a significant breakthrough in the Middle East or effectively deal with the threat of Iran's nuclear programme and his country is currently fighting wars in Afghanistan and Iraq.