The Nobel Prize committee said the EU had contributed to transforming Europe “from a continent of war to a continent of peace”.
The award comes despite widespread recession and unrest across the continent, which was quickly jumped on by eurosceptics.
Nobel committee president Thorbjoern Jagland acknowledged the unusuall timing in announcing the winner, which was decided unanimously by the five-member panel.
The last time an organisation got the award was Medecins Sans Frontieres in 1999.
Mr Jagland highlighted the EU’s work in sealing the reconciliation between France and Germany in the decades after World War II.
He also praised the EU for allowing Spain, Portugal and Greece to join in the 1970s after their authoritarian regimes fell.
Now Croatia is on the verge of joining the union.
EU Commission President Jose Manuel Barroso wrote of his delight on Twitter: “It is a great honour for the whole of the EU, all 500 million citizens, to be awarded the 2012 Nobel Peace prize.”
German Chancellor Angela Merkel said the prize should be a “personal incentive” to begin six decades of peace.
“We must never forget that in order to keep this peace, democracy and freedom, we have to work hard over and over again,” she said.
The UK Independence Party’s Nigel Farage, on the other hand, said the EU is like the former Yugoslavia.
“Rather than bring peace and harmony, the EU will cause insurgency and violence,” he said.
Image via Getty