The bestowal of one of the world's top accolades on a President less than nine months in office, who has yet to score a major foreign policy success, was greeted with gasps of astonishment from journalists at the announcement in Oslo.
Obama said he felt humbled and unworthy of being counted in the company of the "transformative figures" of history who had won the prize.
"I do not view it as a recognition of my own accomplishments but rather an affirmation of American leadership," he said, speaking in the White House Rose Garden. "I will accept this award as a call to action."
The Norwegian Nobel Committee praised Obama for "his extraordinary efforts to strengthen international diplomacy and cooperation between peoples," citing his fledgling push for nuclear disarmament and his outreach to the Muslim world.
Obama has been widely credited with improving America's global image after the eight-year presidency of George W Bush, who alienated both friends and foes with go-it-alone policies like the 2003 US-led invasion of Iraq.
But critics called the Nobel's committee's decision premature, given that Obama so far has made little tangible headway as he grapples with challenges ranging from the war in Afghanistan and the Israeli-Palestinian conflict to nuclear standoffs with Iran and North Korea.
The White House had no idea the Nobel announcement was coming. Obama, who got the news of the prize in a pre-dawn call from his press secretary, now also has the burden of living up to its expectations.
The first African-American to hold his country's highest office, Obama, 48, has struggled with a slew of foreign policy problems bequeathed to him by Bush, while taking a more multilateral approach than his predecessor.
Despite troubles at home including a struggling economy that have eroded his once-lofty approval ratings, the Democratic US President is still widely seen around the world as an inspirational figure.
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