"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 Nobel jury said in making the stunning announcement.
The committee attached "special importance to Obama's vision and work for a world without nuclear weapons" and said he had created "a new climate in international politics." Previous US winners
Obama, 48, took office on January 1 and has since then sought to restore US standing in the world after widespread criticism over the war in Iraq and the world superpower's attitude to efforts to control global warming.
The first black American president has brought the Israeli and Palestinian leaders together for a meeting, approved new diplomatic engagement with Iran, Myanmar and North Korea and signalled a new willingness to attack growing environmental problems.
Obama went to Cairo to make a major speech on relations with the Muslim world, badly tarnished by President George W. Bush's order to invade Iraq. At the United Nations, he has launched an initiative to reduce the number of nuclear weapons in the world.
The first black American president was honoured "for his extraordinary efforts to strengthen international diplomacy and cooperation between peoples," the head of the Norwegian Nobel Committee Thorbjoern Jagland said.
The committee hailed his efforts at dialogue, highlighting their importance in resolving major issues of today, such as disarmament, climate and human rights.
"Dialogue and negotiations are preferred as instruments for resolving even the most difficult international conflicts. The vision of a world free from nuclear arms has powerfully stimulated disarmament and arms control negotiations," it said.
"Thanks to Obama's initiative, the US is now playing a more constructive role in meeting the great climatic changes the world is confronting," it said, adding: "Democracy and human rights are to be strengthened."
The 2008 , the former Finnish president and veteran troubleshooter in international conflicts, said the award should "encourage" Obama's Middle East peace efforts.
"We do not yet have a peace in the Middle East... this time it it was very clear that they wanted to encourage Obama to move on these issues," Ahtisaari told CNN television.
"This is a clear encouragement to do something on this issue, I wish him good luck."
The Nobel award will raise expectations for Obama to stand up for human rights around the world, exiled Uighur leader said.
Kadeer, who has often been tipped for the prestigious prize for her fight on behalf of the Chinese minority group, told AFP: "I am very happy that he got it. Now he has to do something with the award. It raises expectations on him to stand up for oppressed nations."
Obama, who five years ago was a virtual political unknown, is the third US president in office to win the coveted award, after Theodore Roosevelt in 1906 and Woodrow Wilson in 1919. Former US won the prize in 2002.
Last year, the Peace Prize, which consists of a gold medal, a diploma and a cheque worth 10 million Swedish kronor (1.42 million dollars, 980,000 euros), went to Finnish mediator and former president Martti Ahtisaari.
The formal prize ceremony will take place in Oslo on December 10, the anniversary of the death of in 1896 of the prize's creator, Swedish industrialist and inventor of dynamite .