Annan, who has devoted almost his entire working life to the world body, was lauded for "bringing new life to the organization."
"The end of the cold war has at last made it possible for the U.N. to perform more fully the part it was originally intended to play," the awards citation said.
U.N. spokesman Fred Eckhard woke Annan and told him the news shortly after 5 a.m. Friday morning.
"After Sept. 11, I think governments, as never before, see that they have to work together if they are going to come to grips with not just international terrorism but things like poverty and disease," said Eckhard. "The U.N. is the medium and I think they've got the message," he said.
Annan says winning the Nobel Peace Prize won't change him as a person.
He does believe the honor will serve as an incentive for the United Nations, to work harder.
Geir Lundestad, the committee's secretary, noted that the winner was picked Sept. 28 - 17 days after the terror attacks on the World Trade Center and the Pentagon and almost a week into the U.S. military response. "Of course, the committee was very aware of that event," he said.
Lundestad said the United Nations "would have been relevant candidates no matter what but the recent events make them more relevant," he said, adding that he would like to see the United Nations have a role in Afghanistan's future.
The United Nations was cited "for their work for a better organized and more peaceful world."
Annan, born in 1938 in Ghana, became U.N. secretary-general in 1997. He has been praised for his character, moral leadership, his focus on civil wars in Africa and elsewhere and his efforts to combat AIDS.
He was the first leader to be elected from the ranks of United Nations staff. He was the head of U.N. peacekeeping operations when he was tapped for the top job after the United States lobbied to prevent his predecessor, Boutros Boutros-Ghali of Egypt, from taking a second term.
In an unprecedented vote of confidence, Annan was unanimously reappointed to a second five-year term by the 189 U.N. member states in June, six months before his first term expires on Dec. 31.
Annan's wife, Nane, says she is "bubbling over with happiness for my husband and for everyone working at the U.N."
U.N. agencies and people connected to it repeatedly have won the prize, but it had never gone to the world body itself. The U.N. war crimes tribunal for the former Yugoslavia in The Hague, Netherlands, also was considered a contender.
U.N. spokeswoman Marie Heuze said in Geneva that the award was particularly symbolic because it marked the 100th anniversary of the Nobel Prize and came at a time when the United Nations is having to work very hard to ensure the security of its staff.
"This is also in honor of all those who have been killed for the objectives and vales of the U.N." Heuze said.
Annan has responded to the terror attacks by trying to galvanize an international campaign under the U.N. umbrella to defeat terrorism.
Nobel committee chairman Gunnar Berge said the award "could be interpreted as a contribution to the United Nations as the most powerful and efficient instrument in combating conflicts and also as a contribution to the secretary-general to operate more efficiently."
The Nobel committee said the United Nations and Annan would share the $943,000 award in equal parts.
Founded in 1945 by 51 nations, the United Nations has almost quadrupled in membership, is richer and more diverse. It now employs about 52,100 people at U.N. headquarters in New York and 29 other organizations scattered around the globe.
Born in the aftermath of World War II as a shell-shocked world's hope for peace, it remains the unique global gathering place for nations rich and poor, large and small to try to settle international problems.
Last year, South Korean President Kim Dae-jung won the peace prize for his reconciliation efforts with North Korea. No such peace efforts stood out in media speculation this year.
Thirty-four past laureates were expected in Oslo for centennial celebrations leading up to the Dec. 10 awards ceremony. Similar celebrations are planned in Stockholm, Sweden, where the other Nobel Prizes are awarded.
The prizes were created by Swedish industrialist Alfred Nobel in his will and are always presented on the anniversary of his death in 1896.
The first Nobel Peace Prize, in 1901, honored Jean Henri Dunant, the Swiss founder of the Red Cross.
This year's Nobels started Monday with the naming of medicine prize winners, American Leland H. Hartwell and Britons Tim Hunt and Paul Nurse, for work on cell development that could lead to new cancer treatments.
The physics award went Tuesday to German scientist Wolfgang Ketterle and Americans Eric A. Cornell and Carl E. Wieman for creating a new state of matter, an ultra-cold gas known as Bose-Einstein condensate.
On Wednesday, the economics prize went to Americans George A. Akerlof, A. Michael Spence and Joseph E. Stiglitz for developing ways to measure the power of information in a wide range of deals and investments. On the same day, Americans K. Barry Sharpless and William S. Knowles shared the chemistry prize with Ryoji Noyori of Japan for showing how to better control chemical reactions used in producing medicines.
V.S. Naipaul won the literature prize Thursday for his "incorruptible scrutiny" of postcolonial society and his critical assessments of Muslim fundamentalism.
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