The five-person Norwegian Nobel panel praised Obama's "extraordinary efforts to strengthen international diplomacy and cooperation between peoples," in a win that astonished the laureate himself.
A "surprised" and "deeply humbled" Obama said he doubted he deserved the honour but vowed to wield it as a "call to action" to lead a united world against its greatest challenges.
French President Nicolas Sarkozy hailed the prize as "America's return to the hearts of the world's peoples" after disenchantment with the previous presidency of George W. Bush.
Former UN chief Kofi Annan called it "an unexpected but inspired choice."
But the announcement was not universally lauded.
"Who, Obama? So fast? Too fast -- he hasn't had the time to do anything yet," was the incredulous response of Lech Walesa, Poland's historic trade union leader and the 1983 laureate.
For others, Obama's promotion to the rank of global peacemaker was an opportunity to give him some new assignments.
The prize is in "good hands," said Brazilian President Luiz Inacio Lula da Silva, expressing "hope that world peace is a reality and that we have no more nuclear bombs."
German Chancellor Angela Merkel said Obama's win was an "incentive" for all to do more for peace, adding that his goal of a nuclear-free world is one "we must all try to achieve in the coming years."
The 2008 laureate, former Finnish president Martti Ahtisaari, noted that as Middle East peace efforts remain stalled, "this time, it was very clear that they wanted to encourage Obama to move on these issues."
Palestinian leader Mahmud Abbas said he hoped the prize would help bring about an independent Palestinian state, but the Islamist movement Hamas, which controls the Gaza Strip, decried Obama's win.
"He did not do anything for the Palestinians except make promises," said Hamas spokesman Samir Abu Zuhri.
Prime Minister Benjamin Netanyahu, however, said the award "expresses the hope that your presidency will usher in a new era of peace and reconciliation."
In Afghanistan, where the United States is in the ninth year of a bloody conflict against Taliban extremists, President Hamid Karzai hailed Obama's "hard work and new vision on global relations."
But the decision was condemned by the Taliban, who said he had "not taken a single step toward peace in Afghanistan."
On the streets of Kabul, Afghans said they did not believe Obama's policies had improved the situation in their war-ravaged country.
"The situation is getting worse here," said shopkeeper Ahmad Tawab.
Abdul Hakeem, an 18-year-old tailor, said: "At least I can say that he is better than George Bush."
The Nobel committee acted "hastily," said arch foe Iran's Foreign Minister Manouchehr Mottaki, arguing a "good timing" for the prize would have been after US troops pull out of Afghanistan and Iraq "and the United States is standing up for the rights of the Palestinian people."
His comments were echoed in Iraq, where Obama has vowed to end a war started by his predecessor.
Obama "was able to calm the situation in Iraq and other countries, and he made America reach out to Islamic and Arabic countries -- he really deserved this prize more than anyone else," said Abu Istabraq, a 45-year-old security guard for a Baghdad bank.
UN nuclear watchdog chief Mohamed ElBaradei -- another former winner -- said Obama had "reached out across divides and made clear that he sees the world as one human family, regardless of religion, race or ethnicity."
Prime Minister Yukio Hatoyama of Japan, the only country to have suffered a nuclear attack, said he saw "the world changing" since Obama entered the White House on January 20.
South African archbishop Desmond Tutu, who won the prize in 1984, saw Obama as a younger incarnation of Nelson Mandela, a 1993 co-laureate.
"It is a very imaginative and somewhat surprising choice. It is wonderful," he said in Cape Town.
Obama's Kenyan relatives reacted with delight.
"It is an honour to the family... we are very happy that one of us has been honoured. We congratulate Barack," Said Obama, the president's step-brother, told AFP. Obama's father was Kenyan and the president is considered a favourite son of the east African country.
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