The $1.3 million award will be split between the organisation and Mohamed ElBaradei.
In making its announcement, the Norwegian Nobel Committee said that it wanted to emphasise the need for international cooperation to meat the threat of nuclear weapons.
“This principle finds its clearest expression today in the work of the IAEA and its Director General,” wrote the judging panel.
“In the nuclear non-proliferation regime, it is the IAEA which controls that nuclear energy is not misused for military purposes, and the Director General has stood out as an unafraid advocate of new measures to strengthen that regime.”
The committee added that the IAEA’s work is of “incalculable importance”.
The IAEA was formed in 1957, four years after US President Eisenhower addressed the United Nations on the likely impact on the world of atomic energy.
In the year before the agency was formed, 81 nations agreed the “three pillars” of its work – nuclear verification and security, safety and technology transfer.
In 1968 the agency was behind the nuclear non-proliferation treaty but in recent years it has been required to focus more on countering the threat of nuclear terrorism.
63 year old Dr. ElBaradei joined the agency in 1984 and became Director General in 1997. Born and brought up in Egypt, he trained in law before joining the Egyptian Diplomatic Service.
While the other Nobel prizes are awarded by the Swedish Nobel Committee, Alfred Nobel stipulated in his will that a panel from the Norwegian government should decide the recipient of the Peace Prize.
He wrote that it should be given to whoever had done most for the “abolition or reduction of standing armies”.
The Norwegian Nobel Committee says that it has in recent years concentrated on the struggle to diminish the significance of nuclear arms in international politics, with a view to their abolition.