Obama has, as President, created a new climate in international politics, a statement released by the Norwegian Nobel Committee said, lauding his vision of a world without nuclear weapons.
It was because of Obama's effort that multi-lateral diplomacy has regained a central position, with emphasis on the role that the United Nations and other international institutions can play, the statement said.
48-year-old Obama is the fourth US President to win the Nobel Peace Prize.
The prize committee said the US President's vision of a world free from nuclear arms has powerfully stimulated disarmament and arms control negotiations.
Obama was honoured "for his extraordinary efforts to strengthen international diplomacy and cooperation between peoples," it said.
"Thanks to Obama's initiative, the USA is now playing a more constructive role in meeting the great climatic challenges the world is confronting. Democracy and human rights are to be strengthened," it said.
"Only 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 statement said.
The Committee said it endorsed Obama's appeal that "Now is the time for all of us to take our share of responsibility for a global response to global challenges."
Former Finnish president Martti Ahtisaari won the award in 2008.
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