Ono bestowed the first Lennon Ono Grant for Peace to Israeli Zvi Goldstein and Palestinian Khalil Rabah on Wednesday at the United Nations in Geneva, Switzerland, for their efforts to remain "creative and inspirational" amid the tensions of war.
The award was made on the day that would have been Lennon's 62nd birthday. Lennon was shot dead outside his New York apartment in 1980 by Mark Chapman.
Earlier this week, Chapman - who was jailed after he admitted killing the celebrated musician - failed to secure his release from prison after the New York State parole board turned down his second parole bid.
At the awards ceremony, Ono said: "Imagine all the people living life in peace," echoing the words to Lenon's peace anthem Imagine.
She added that future grants would be given only to artists living "in regions of conflict".
Goldstein is an award-winning Israeli artist who lives in Jerusalem. He accepted the award "in memory of all those who died in the Israeli-Palestinian conflict".
Rabah lives and works in Ramallah and organised the first institution for contemporary art in the West Bank. He was also a pioneer in exhibiting his work alongside that of Israeli artists.
"I think we need to continue this spirit of the possibility of peace," Rabah said.
Poster
Ono and Lennon, in their years together, attracted much attention with their gestures to promote world peace.
The pictures of their hotel "bed-in" have become some of the most enduring of the last few decades.
Likewise, Imagine, is considered timeless. Since Lennon's death, Ono has continued her campaigning around the world.
Earlier this year she was believed to have paid £150,000 for a giant billboard space amid the flashing neon signs of Piccadilly Circus.
There, she has placed a poster bearing the words: "Imagine all the people living life in peace" - a lyric from Imagine.
Wednesday's ceremony was attended by around 300 people, made up of artists and diplomats, including UN Secretary General Kofi Annan.
Mr Annan said: "Individuals can make a difference; individuals can play a role, and she's (Ono) out there making a difference and I think it's great."