There was speculation he'd been nominated, but he wasn't a favorite to win -- hence the gasp of surprise when the announcement was made.
The early morning announcement shocked reporters in Oslo, Norway. At the White House the president accepted, but not on his own behalf.
"To be honest, I do not feel I deserve to be in the company of so many of the transformative figures who've been honored by this prize," said President Obama.
That sentiment is coming from many in the U.S. and overseas.
"Are you kidding me, are you kidding me," said a man overseas.
But the Peace Prize Committee, which considered a record 205 nominations, voted unanimously for Mr. Obama.
"If you look at the history of the Nobel Peace Prize, we have on many occasions tried to enhance what many personalities are trying to do," said a member of the Nobel Peace Prize Committee.
That's how President Obama took it.
"And I know that throughout history the Nobel Peace Prize has not just been used to honor specific achievement, it's also been used as a means to give momentum to a set of causes," he said.
Gloria Duffy is a former nuclear arms negotiator in the Clinton administration. She says the prize enhances the president's position.
"This is a turnaround where the international community is saying we approve of President Obama, we approve of the approaches he's taking. And that includes his hardline on Iran," said Duffy.
But at home, U.C. Berkeley political scientist Henry Brady believes the prize will invite unflattering comparisons.
"What has Barack Obama really done? Has he ended a war as Theodore Roosevelt did? Has he started the League of Nations as Woodrow Wilson did? Has he created a Marshall Plan as George Marshall Secretary of State did? It's not clear that he's done any of those things yet," said Professor Brady, Ph.D.
President Obama was in office just 12 days before the nominations were closed, which argues this peace prize is in part about replacing a "go it alone" President Bush, with a more "we're all in this together" President Obama.