It won the prestigious honor for its "work to draw attention to the catastrophic consequences of any use of nuclear weapons and for its groundbreaking efforts to a achieve treaty-based prohibition on such weapons".
The Norwegian committee that chooses the winner, sorted through more than 300 nominations for this year's award, which recognizes both accomplishments and intentions.
The prize announcement was made in Oslo on Friday morning, culminating a week in which Nobel laureates have been named in medicine, physics, chemistry and literature.
The Norwegian Nobel Committee does not release names of those it considers for the prize, but said 215 individuals and 103 organisations had been nominated.
The five members of Norway's Nobel committee unveiled their choice at 10 am in what is traditionally an eagerly-anticipated award handed out during the foundation's prize-giving week.
Lawmakers, cabinet ministers, former laureates and university professors are among the thousands of people around the world entitled to suggest candidates for the Peace Prize.
The award is announced in October, but is always handed out on December 10 - the anniversary of Alfred Nobel's death.
This year's Nobel prizes for physics, chemistry, medicine and literature have already been announced - all going to men.