The stunning choice made Obama the third sitting US president to win the Nobel Peace prize and shocked Nobel observers because Obama took office less than two weeks before the 1 February nomination deadline.
Obama's name had been mentioned in speculation before the award but many Nobel watchers believed it was too early to award the president.
“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 committee said.
“His diplomacy is founded in the concept that those who are to lead the world must do so on the basis of values and attitudes that are shared by the majority of the world's population."
The committee said it attached special importance to Obama's vision of, and work for, a world without nuclear weapons.
“Obama has as president created a new climate in international politics. Multilateral diplomacy has regained a central position, with emphasis on the role that the United Nations and other international institutions can play,” the committee said.
Theodore Roosevelt won the award in 1906 and Woodrow Wilson won in 1919. Former President Jimmy Carter won the award in 2002, while former Vice President Al Gore shared the 2007 prize with the UN panel on climate change.
Many people are shocked and asking, "what has he done to deserve this?" Some wonder now about whether the Nobel Peace Prize is legitimate anymore.
To look at Obama's true record, see the skit done on Saturday Night Live recently. It's called the "SNL Obama Nothing Video." This is a true reflection of his Presidency to date.