Muhammad Yunus of Bangladesh and the Grameen Bank have been jointly awarded the 2006 Nobel Peace Prize.
Mr Yunus was honoured for his pioneering work against poverty
Mr Yunus, an economist, founded the bank, which is one of the pioneers of micro-credit lending schemes for the poor, especially women, in Bangladesh.
Mr Yunus, 66, said he would use the 10m Swedish kronor ($1.35m, £730,000) prize money to "find more innovative ways" to help the poor launch businesses.
He said he was delighted at the news and proud of the bank's achievement.
"I'm very very happy. It's a great honour for us and for Bangladesh. It's a recognition of our work," he told the BBC Bengali service.
"As a Bangladeshi, I'm proud that we have given something to the world. Our work has now been recognised by the whole world. "
The winners were revealed by the Nobel committee chairman, Ole Danbolt Mjoes, in Oslo.
Mr Mjoes said Mr Yunus had shown himself to be a leader who had managed to translate visions into practical action for the benefit of millions of people.
He and the bank were being honoured "for their efforts to create economic and social development from below", Mr Mjoes said.
He said the bank's work in creating opportunities for large numbers of people to get out of poverty created the conditions for sustainable peace.
"Development such as this is useful in human rights and democracy," said Mr Mjoes.
The BBC's Lars Bevanger in Oslo says this year's winner caught most there by surprise.
Many commentators had expected an award to someone involved in peace talks, our correspondent says.
He says in awarding this prize to an economist, the Nobel Committee has again shown itself willing to widen the scope of the prestigious prize.
Mr Yunus set up the bank in 1976 with just $27 from his own pocket. Thirty years on, the bank has 6.6 million borrowers, of which 97% are women, according to the Grameen website.
Mr Yunus is expected to pick up the award and prize money during a ceremony in Oslo in December.