The new president was hailed for his willingness to reach out to the Islamic world, his commitment to curtailing the spread of nuclear weapons and his goal of bringing the Israelis and Palestinians into serious, fruitful negotiations.
Archbishop Desmond Tutu of South Africa, who won the prize 1984, said Obama's award shows great things are expected from him in the coming years.
"In a way, it's an award coming near the beginning of the first term of office of a relatively young president that anticipates an even greater contribution towards making our world a safer place for all," he said. "It is an award that speaks to the promise of President Obama's message of hope."
He said the prize is a "wonderful recognition of Obama's effort to reach out to the Arab world after years of hostility.
In the Kenyan city of Kisumu, the home province of Obama's father, local radio shows interrupted broadcasting to have live phone-ins so callers could congratulate Obama on his win. Traders in the market huddled around hand-held radios and touts shouted the news from the windows of local minibuses _ known as matatus.
"When I heard it on the radio I said Hallelujah!" said 65-year-old James Andaro. "It's God's blessing. This win is for Africa."
Matatu driver Ajos Rambanya, 27, said: "I am very happy. Someone who is good is known by his deeds and Obama has proven that."
Another former Nobel winner, Mohamed ElBaradei, director general of the International Atomic Energy Agency in Vienna, said Obama has already provided outstanding leadership in the effort to prevent nuclear proliferation.
"In less than a year in office, he has transformed the way we look at ourselves and the world we live in and rekindled hope for a world at peace with itself," ElBaradei said. "He has shown an unshakable commitment to diplomacy, mutual respect and dialogue as the best means of resolving conflicts. He has reached out across divides and made clear that he sees the world as one human family, regardless of religion, race or ethnicity."
Still, some said the award came too soon, in light of the lack of tangible progress toward the vital goals of bringing peace to the Middle East, persuading Iran to give up its nuclear ambitions and improving relations with North Korea.
"The award is premature," said Eugene Rogan, director of the Middle East Center at Oxford University in England. "He hasn't done anything yet. But he's made clear from the start of his presidency his commitment to promote peace. No doubt the Nobel committee hopes the award will enhance his moral authority to advance the cause of peace while he's still president."
Massimo Teodori, one of Italy's leading experts of U.S. history, said the Nobel decision is a clear rejection of the "unilateral, antagonistic politics" of Obama's predecessor, George Bush.
"The prize is well deserved after the Bush years, which had antagonized the rest of the world," Teodori said. "President Obama's policy of extending his hand has reconciled the United States with the international community."
Teodori mentioned Obama's efforts to reach out to former adversaries and his landmark speech in Cairo addressed to the Muslim world.
"For now it's still intentions rather then fully implemented policies, but they are deserving ones," Teodori said.
Reaction was far more muted in some Islamic countries. In Pakistan's central city of Multan, radical Islamic leader Hanif Jalandhri, said he was neither happy nor surprised by Obama's award.
"But I do hope that Obama will make efforts to work for peace, and he will try to scrap the policies of Bush who put the world peace in danger," said Jalandhri, secretary general of a grup that oversees 12,500 seminaries. "This prize has tripled Obama's responsibilities, and we can hope that he will try to prove through his actions that he deserved this honor."
Others were stunned.
"I don't think Obama has done anything for peace," said shop owner Rana Naveed, 38, in Multan. "I am shocked."
Associated Press Writers Abisalom Omolo in Kogelo, Kenya, Celean Jacobson in Johannesburg, Alessandra Rizzo in Rome and Khalid Tanveer in Multan, Pakistan contributed to this story.