"His work provides an outstanding example of what courage, persistency and enduring hope may accomplish for human rights and dignity in times when these values seen the most distant," the Olof Palme Memorial Fund said in a statement.
Mukwege's Panzi Hospital, in the war-torn east of Congo, "serves peace, understanding and solidarity in a way worthy of imitation through the work with the women who are the most exposed victims of this conflict."
Congolese non-governmental organizations have accused all sides in the inter-ethnic conflicts that have raged in the region for a decade of using "systematic rape" against women as a war crime.
Mukwege, 53, founded his hospital in Bukavu in Sud-Kivu province after noting how many of his patients sustained serious injuries or contracted diseases after being raped.
Today, the centre receives around 10 women rape victims each day, with more than a quarter of the patients requiring surgery after their ordeal.
The Olof Palme award for outstanding achievement, aimed at promoting peace and disarmament and combat racism and xenophobia, was created in memory of a popular Swedish prime minister who was gunned down by a lone attacker in February 1986, shortly after leaving a Stockholm cinema.
Mukwege will receive his award, consisting of a diploma and $75,000 at a ceremony at the Swedish parliament on January 30.
Iranian feminist and journalist Parvin Ardalan won the 2007 prize, while other past winners include former UN secretary general Kofi Annan, Myanmar's imprisoned pro-democracy leader Aung San Suu Kyi and former Czech president Vaclav Havel.