The academy honoured the 67-year-old “for her polyphonic writings, a monument to suffering and courage in our time”.
Alexievich, who was one of the front runners for the award, has drawn international acclaim with her emotional accounts of the Chernobyl disaster and Second World War witness accounts.
Chronicling such horrors in the first person through the words of witnesses, Alexievich, who lived in Sweden in the early 2000s, has seen her works translated into numerous languages and scooped international awards.
But her books, controversially written in Russian, are not published in her home country, long ruled by authoritarian President Alexander Lukashenko, amid what the author has described as “a creeping censorship”.
Alexievich, only the 14th woman to be awarded the Nobel literature prize, takes home the sum of eight million Swedish kronor (around $950,000).
AS-IT-HAPPENED: The Local's blog from the announcement in Stockholm
The Swedish Academy's Permanent Secretary Sara Danius spoke to global media in English about the decision to award the prize to Alexievich, with The Local's Maddy Savage among those in the media scrum surrounding her.
She revealed that the winner had simply said “fantastic” when telephoned about her win.
Asked why the Academy had chosen to give her the accolade this year she said: “Well, it is very simple, she is an extraordinary writer. What she's done, her true achievement is that she's offering us a literary chronicle of the emotional history of Soviet man (…) the Soviet individual, because it's not only men, but children, men and women.”
— The Nobel Prize (@NobelPrize) October 8, 2015
She added: “She's also managed to evolve a literary style all of her own. She's basically evolved a whole new literary genre. And so what we have is interesting new historical material as well as a very interesting new literary genre.”
The Nobel awards week continues on Friday with the other most closely-watched award, the peace prize, which is handed out in Oslo, Norway.
The economics prize will wrap up this year's Nobel season on October 12th.
The laureates will receive their prizes at formal ceremonies in Stockholm and Oslo on December 10th, the anniversary of the 1896 death of prize creator Alfred Nobel, a Swedish philanthropist and scientist.