The awards were announced by Staffan Normark, the Permanent Secretary at The Royal Swedish Academy of Sciences.
The scientists – who are based in Japan and the US – were praised "for the invention of efficient blue light-emitting diodes which has enabled bright and energy-saving white light sources".
Normark said that their work "triggered a fundamental transformation of lighting technology".
Previously, only red and green diodes had been used in lamps, but without blue light, scientists had been unable to create white lamps for use in homes and businesses.
The Nobel Prize is awarded for the inventions deemed have a great benefit on mankind.
LED lights hold "great promise for increasing the quality of life for over 1.5 billion people around the world who lack access to electricity grids," according to the Royal Swedish Academy of Sciences press release.
The winners faces were beamed into the auditorium in Stockholm where the announcement was made. Photo: TT
The winners are set to take home 8.0 million Swedish kronor – just over $1,113,000.
One of them – Shuji Nakamura – was invited to talk to journalists via a video link from his home in California, but a poor connection made it difficult for reporters to understand what he was saying.
"You'd think all these scientists could have created a better communication feed, reported The Local's Oliver Gee, who is blogging live from the event.
During a press conference, our correspondent also asked Steffan Normark how the laureates had reacted to winning the prize.
Previous Nobel laureates in Physics include Albert Einstein, Marie Curie and Niels Bohr.
Last year two scientists shared the prize for their work on the theory of the Higgs boson.
Peter Higgs, from the UK and Francois Englert were among several physicists in the 1960s, who proposed a mechanism to explain why the most basic building blocks of the Universe have mass.
The particle was finally discovered at the Large Hadron Collider (LHC) at Cern, in Switzerland in 2012.
The 2014 Nobel prizes for Chemistry, Literature and Economics awards are also set to be announced over the next week, with the Nobel Peace Prize revealed in Oslo.